<PAGE>
                  SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.

                              FORM 10-K

                              (Mark One)

   [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended January 1, 2000

                                       OR

  [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 0-20001

                               VISTA EYECARE, INC.
             (Exact name of Registrant as specified in its charter)

                                     Georgia
                         (State or other jurisdiction of
                         incorporation or organization)

                                   58-1910859
                      (I.R.S. Employer Identification No.)

                               296 Grayson Highway
                             Lawrenceville, Georgia
                    (Address of principal executive offices)

                                      30045
                                   (Zip Code)

       Registrant's telephone number, including area code: (770) 822-3600

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

      Securities registered pursuant to Section 12(g) of the Act:

                Common Stock, par value $.01 per share

                           (Title of Class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

<PAGE>

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     The number of shares of Common Stock of the  registrant  outstanding  as of
February 1, 2000, was 21,179,103. The aggregate market value of shares of Common
Stock held by  non-affiliates  of the  registrant  as of February  1, 2000,  was
approximately  $21.2  million  based on a closing  price of $1.313 on the NASDAQ
Stock  Market on such date.  For  purposes of this  computation,  all  executive
officers  and  directors of the  registrant  are deemed to be  affiliates.  Such
determination  should not be deemed to be an admission  that such  directors and
officers are, in fact, affiliates of the registrant.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the following  documents  have been  incorporated  by reference
into the parts indicated:  the Company's definitive Proxy Statement for the 2000
Annual  Meeting of  Shareholders  to be filed with the  Securities  and Exchange
Commission  not later than 120 days after the end of the fiscal year  covered by
this report--Part III.

                                     Page 2
<PAGE>
                                     PART I

ITEM 1. BUSINESS

OVERVIEW

     Vista Eyecare, Inc. (the Company,  which may be referred to as we, us, our,
or Vista) is a retail optical  company,  with 926 vision centers  throughout the
United  States  and  Mexico.  We  operate  604 of our  vision  centers  in  host
departments,  such as Wal-Mart and Sam's Club,  and 322 of our vision centers in
malls and strip centers.  Our locations  sell a wide range of optical  products,
including  eyeglasses,  contact lenses, and sunglasses.  At approximately 650 of
our locations,  we offer the services of  optometrists.  These  optometrists are
typically  independent  of us and operate their own practices  within our retail
locations. To support our retail operations, we also operate three manufacturing
and distribution centers.

CHAPTER 11 CASES

     On April 5, 2000,  the Company and ten of its  subsidiaries  (collectively,
the "Debtors") filed voluntary  petitions with the United State Bankruptcy Court
for the Northern  District of Georgia for  reorganization  under Chapter 11 (the
"Chapter 11 Cases"). The Chapter 11 Cases have been consolidated for the purpose
of joint  administration  under Case No.  00-65214.  The Debtors  are  currently
operating their businesses as  debtors-in-possession  pursuant to the Bankruptcy
Code.  All  affiliated  entities of the  Company are  included in the Chapter 11
Cases,  except  only (a) three  subsidiaries  which are  licensed  managed  care
organizations and (b) foreign subsidiaries of the Company.

     We cannot  predict the  outcome of the Chapter 11 Cases or their  effect on
the Company's  business.  See Item 7 - "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations," Note 3 of Notes to Consolidated
Financial Statements,  and the Report of Independent Public Accountants included
herein. If the liabilities  subject to compromise in the Chapter 11 Cases exceed
the fair value of our  assets,  unsecured  claims in the Chapter 11 cases may be
satisfied  at less than 100% of their  face  value and the  common  stock of the
Company  may have no value.  The NASDAQ  Stock  Market has  notified us that our
common  stock may no longer be  eligible  for  trading  on the  NASDAQ  SmallCap
Market.  See  Item  5 -  "Market  for  Registrant's  Common  Stock  and  Related
Stockholder Matters."

DEPENDENCE ON WAL-MART

     We operate  385 units in  domestic  Wal-Mart  stores,  of which 379 operate
pursuant  to a  master  license  agreement  (see  Item  1 -  "Leased  Department
Agreements").  These units generated approximately 61.2% of our revenue in 1999.
We therefore  depend on Wal-Mart and on our agreement  with them for much of our
operations.

ACQUISITIONS

     To reduce our dependence on Wal-Mart,  we acquired Midwest Vision,  Inc. in
1997 and  Frame-n-Lens  Optical,  Inc. and New West Eyeworks,  Inc. in 1998 (See
Note 6 to  consolidated  financial  statements).  At the time of the  respective
acquisitions,  these three companies  collectively operated more than 500 vision
centers and generated approximately $140 million in annualized revenues.

                                     Page 3
<PAGE>

BRANDED FREE-STANDING STORE STRATEGY

     Part of our business strategy is to build a national branded value oriented
retail  optical  chain  using our  free-standing  vision  centers as a platform.
During the first half of 1999,  all of the  free-standing  vision  centers  were
renamed "Vista Optical".

DATE OF INFORMATION

     Unless  otherwise  expressly  stated,  all  information in this  "Business"
section of this Form 10-K is as of January 1, 2000.

VISION CENTER OPERATIONS

     Our vision  centers  typically  occupy between 1,000 and 1,500 square feet,
including  areas for merchandise  display,  customer  service,  and contact lens
fitting.  Each vision center maintains inventory of approximately 1,000 eyeglass
frames and 550 pairs of contact lenses,  along with sunglasses and other optical
accessories.  Our three optical laboratories deliver prescription eyewear to all
our vision  centers.  The vision  centers  located in Wal-Mart  typically have a
finishing  laboratory,  which  allows for the vision  center to provide one hour
service for most single vision prescription  lenses.  These vision centers carry
inventory of approximately 725 pairs of spectacle lenses.

MARKETING

     We are a value  provider  of  optical  goods and  stress  that theme in our
marketing.  We offer everyday low prices at our vision centers. Vista also has a
"satisfaction guaranteed" customer policy. We are constantly vigilant about ways
to lower our own costs so we may pass savings on to our customers.

MANAGED VISION CARE

     We expect that retail  optical sales through  managed  vision care programs
will  increase  over the next several  years as a percentage  of overall  retail
optical sales.  Under managed vision care programs,  participants  fulfill their
eyecare  and  eyewear  needs at  specific  locations  designated  by the program
sponsor.  We  believe  our  network  of 926  vision  centers  combined  with the
convenience of their locations and our ability to offer low prices should enable
us to make competitive bids for managed care contracts.

TRADEMARKS

     We use the  "Vista  Optical"  name to  identify  our  free-standing  vision
centers,  as well as those  vision  centers  operating  in Fred Meyer and Meijer
Thrifty Acres  locations.  Our vision  centers in Wal-Mart are identified as the
"Vision  Center  Located  in  Wal-Mart."  Our  vision  centers in Sam's Club are
identified as "Optical  Center  Inside Sam's Club".  Vista has also licensed the
right  to use the  "Guy  Laroche"  trademark  for  certain  optical  goods.  Our
agreement  with Guy Laroche  expires on December 31, 2001, but can be renewed at
our option.

                                     Page 4
<PAGE>

EMPLOYEES

     We employ 3,431  associates on a full-time basis and 1,269  associates on a
part-time  basis.  We have  4,079  associates  engaged in retail  sales,  430 in
laboratory   and   distribution   operations,   and   191  in   management   and
administration. Apart from our retail employees in Mexico, none of our employees
are  governed  by any  collective  bargaining  agreements.  We believe  that our
employment relations are generally good.

OPTOMETRISTS

     Optometrists are important to the success of our vision centers.  We strive
to have an  optometrist  on at least a part time basis at many of our locations.
These  optometrists are typically  independent from Vista and lease a portion of
our locations for an eye examination facility. We typically charge rent to these
optometrists,  in exchange for the premises and the equipment  which we provide.
Our agreement with Wal-Mart  requires us to have an optometrist on duty at least
48 hours each week. Our relationships with optometrists are subject to extensive
regulation. (See Item 1 - "Business - Government Regulation".)

MANUFACTURING AND DISTRIBUTION

     Vista operates three manufacturing and distribution facilities which supply
substantially all requirements of our vision centers. The facilities are located
in   Lawrenceville,   Georgia   (this   facility   also   includes  the  central
administrative  offices of Vista);  Fullerton,  California  (this  facility also
includes administrative  offices); and St. Cloud, Minnesota.  Each vision center
located in Wal-Mart stores (with the exception of seven vision centers  acquired
in  1998)  has its own  finishing  laboratory,  which  manufactures  lenses  for
approximately half of all customers purchasing spectacle lenses.

     Our distribution centers provide lens blanks,  frames,  contact lenses, and
sunglasses to our vision centers.  We use an overnight  delivery service to ship
completed orders and replenishment items to the vision centers. The distribution
centers and the manufacturing  facilities are interfaced with Vista's management
information system.

MANAGEMENT INFORMATION SYSTEM

     In 1999, Vista completed the development of a new point of sale system.  We
began installing the system in our vision centers in the fall of 1999 and expect
to complete the installation in all of our units by the second half of 2000. The
system is working  substantially as planned.  The system was designed to upgrade
data  processing,  broaden  capabilities  at the retail  level,  and improve the
processing of managed care transactions. The system was also designed to be Year
2000 compliant.  See Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations- Impact of the Year 2000 Issue."

LEASED DEPARTMENT AGREEMENTS

     We  have   agreements  in  place  which  govern  our   operations  in  host
environments,  such as Wal-Mart.  Typically,  each agreement is for a base term,
followed by an option to renew.  The agreements  provide for payments of minimum
and percentage rent, and also contain customary provisions for leased department
operations. The table below sets forth key data about each of these agreements:

                                     Page 5
<PAGE>

<TABLE>
<CAPTION>

                          No. of Units as                                No. of Options
     Vision Centers        of January 1,      Length of    Length of     Exercisable in
       Located In             2000            Base Term   Option Term      Fiscal 2000
                                              (in years)   (in years)
----------------------------------------------------------------------------------------
<S>                           <C>                 <C>         <C>             <C>
Wal-Mart<F1>                  379                 9           3               51


----------------------------------------------------------------------------------------
Sam's Club                    111                 5           5                0


----------------------------------------------------------------------------------------
Fred Meyer                     54                 5           5                1


----------------------------------------------------------------------------------------
Wal-Mart Mexico                27                 5           2                4


----------------------------------------------------------------------------------------
Meijers Thrifty Acres           9                 5           0                0


----------------------------------------------------------------------------------------
Military Bases                 18               2 or 5        0                0


----------------------------------------------------------------------------------------
</TABLE>

<F1> The Company also  operates six  additional  Wal-Mart  stores which  operate
     under individual leases.

Other Terms
-----------

     Our agreement  with Wal-Mart gives us the right to open at least 400 vision
centers, including those already open. Our agreement with Wal-Mart also provides
that,  if  Wal-Mart  converts  its own store to a  "supercenter"  (a store which
contains a grocery  department  in addition to the  traditional  Wal-Mart  store
offering) and relocates our vision center as part of the conversion, the term of
our lease begins again.  We believe that Wal-Mart may in the future convert many
of its stores and  thereby  cause  many of our  leases to start  again.  We have
received no  assurances  from  Wal-Mart as to how many of their  locations  will
ultimately be converted.

     Our agreement with Wal-Mart  Mexico  provides that each party will not deal
with other parties to operate leased department  vision centers in Mexico.  This
agreement  also permits each party to terminate the lease for each vision center
which fails to meet minimum sales requirements specified in the agreement.

                                     Page 6
<PAGE>

Options to Renew
----------------

     Wal-Mart  Vision  Centers

     We exercised our option to renew 21 the leases for Wal-Mart  vision centers
in 1999. The base term for 51 vision  centers  expires in 2000, and we will need
to determine which leases to extend.  We expect to renew the leases for the vast
majority  of these  vision  centers.  These  decisions  will be based on various
factors,  including sales levels,  anticipated future  profitability,  increased
rental fees in the option period, and market share.

     Other Vision Centers

     We have exercised all options to renew locations in Sam's Clubs. By the end
of 2003, the term for all Sam's Club units will have expired. Our agreement with
Fred Meyer  obligates  us to exercise  our  renewal  option as to all or none of
these  locations  with the  exception  of five  stores,  which are  covered by a
separate  agreement.  This option must be exercised in 2003. Under our agreement
with Wal-Mart Mexico, we have two options for two year renewals,  and one option
for an additional one year renewal, for each vision center.


No  Assurances of  Expansion
----------------------------

     We have no  assurances  or  guarantees  that we will be able to expand  our
operations in any of our host  environments.  However,  we periodically  discuss
such  opportunities  with existing and new potential host companies.  We believe
that our most likely avenue of additional  expansion will be the addition of new
free standing locations.

GOVERNMENT REGULATION

     Our business is heavily regulated by federal, state, and local law. We must
comply with federal laws such as the Social  Security Act (which  applies to our
participation in Medicare  programs),  the Health  Insurance  Portability Act of
1996 (which governs our  participation  in managed care programs),  and the Food
and Drug  Administration  Act (which  regulates  medical devices such as contact
lenses).  In  addition,  all states have passed laws which  govern or affect our
arrangements  with the  optometrists  who practice in our vision  centers.  Some
states, such as California, Texas, North Carolina, and Kansas, have particularly
extensive and burdensome  requirements which affect the way we do business. Many
of these states also have  adopted laws which mirror the federal laws  described
above.   Local  ordinances  (such  as  zoning   requirements)  can  also  impose
significant burdens and costs of compliance.  Frequently, our competitors sit on
state and local boards. Our risks and costs of compliance are often increased as
a result.

                                     Page 7
<PAGE>
     We believe that we  substantially  comply with material  regulations  which
apply to our business.

COMPETITION

     The retail  eyecare  industry is  extremely  competitive.  We compete  with
national  companies such as Lenscrafters and Cole; we also compete with numerous
regional  and local  firms.  In addition,  optometrists,  ophthalmologists,  and
opticians provide many of the same goods and services we provide.  The level and
intensity of  competition  can vary  dramatically  depending  on the  particular
market.  We believe that we have numerous  competitive  advantages,  such as our
everyday low pricing, product selection, and quality and consistency of service.

     We also  compete  for  managed  care  business.  Our  competition  for this
business  is  principally  the  larger  national  and  regional  optical  firms.
Competition for this business is driven by size of provider network, quality and
consistency of service,  and by pricing of vision care services.  We have one of
the largest  networks  in the  country and believe  that the size of the network
gives us a competitive advantage.

     Several of our competitors have significantly  greater financial  resources
than we do. As a result,  they may be able to engage in extensive  and prolonged
price promotions which may adversely affect our business.  They may also be able
spend more than we do for advertising.

MEXICO OPERATIONS

     We operate 27 vision  centers in Mexico  under a master  license  agreement
with  Wal-Mart.  Our  operations in Mexico face unique  risks,  such as currency
devaluations,  inflation,  difficulties in cross-cultural marketing, and similar
factors.


ITEM  2.   PROPERTIES

     Our 926 vision  centers in  operation  as of January 1, 2000 are located as
follows:

                                     Page 8
<PAGE>

<TABLE>
<CAPTION>
    Location                  Total         Location                  Total
    --------                  -----         --------                  -----
 <S>                            <C>      <S>                            <C>
 Alabama                        12       Nevada                         11
 Alaska                         18       New Hampshire                   4
 Arkansas                        4       New Jersey                     13
 Arizona                        40       New Mexico                     12
 California                    242       New York                       29
 Colorado                       27       North Carolina                 47
 Connecticut                    10       North Dakota                   10
 Florida                        39       Ohio                            4
 Georgia                        40       Oregon                         40
 Hawaii                          4       Pennsylvania                   22
 Idaho                          11       Puerto Rico                     1
 Illinois                        9       South Carolina                 14
 Indiana                         4       South Dakota                    1
 Iowa                           14       Tennessee                       8
 Kansas                         13       Texas                          37
 Kentucky                        3       Utah                            1
 Louisiana                       3       Virginia                       26
 Maine                           1       Washington                     47
 Maryland                        4       West Virginia                   7
 Massachusetts                   5       Wisconsin                       3
 Michigan                       11       Wyoming                         3
 Minnesota                      34
 Missouri                        6
 Montana                         5       Mexico                         27
</TABLE>

     Our  headquarters in  Lawrenceville,  Georgia is located in a 66,000 square
foot building  which  includes a distribution  center and lens  laboratory.  The
building is subleased  from  Wal-Mart  through  2001. We have an option to renew
this lease for approximately seven years.

     The Company has regional  facilities  located in St.  Cloud,  Minnesota and
Fullerton, California. The 20,000 square foot St. Cloud facility is subject to a
lease that expires in October 2007. The 45,000 square foot Fullerton facility is
subject to a lease that expires in August  2006.  The Company also has an option
to extend the Fullerton lease for five years.  Both  facilities  contain optical
laboratories.

ITEM 3.   LEGAL PROCEEDINGS

     On April 5, 2000, the Company and ten of its  subsidiaries  filed voluntary
petitions with the United States  Bankruptcy Court for the Northern  District of
Georgia for reorganization  under Chapter 11 of the Bankruptcy Code. The Debtors
are currently operating their businesses as  debtors-in-possession.  The Chapter
11 Cases have been  consolidated for the purpose of joint  administration  under
case number 00-65214. All affiliated entities of the Company are included in the
Chapter 11 cases,  except only (a) three subsidiaries which are licensed managed
care organizations and (b) foreign subsidiaries of the Company.

                                     Page 9
<PAGE>

     We cannot  predict the  outcome of the Chapter 11 Cases or their  effect on
the  Company's  business.  See Item 1 - "Business  - Chapter 11 Cases,"  Item 7-
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations,"  Note 3 of  Notes to  Consolidated  Financial  Statements,  and the
Report of Independent  Public  Accountants  included herein.  If the liabilities
subject  to  compromise  in the  Chapter  11 Cases  exceed the fair value of the
assets,  unsecured claims may be satisfied at less than 100% of their face value
and the common stock of the Company may have no value.

     On October 6, 1999,  former store  managers of  Frame-n-Lens  filed a class
action in the Orange County  Superior Court in California  (Kremer and Riddle v.
Vista Eyecare,  Inc.), alleging that the Company failed to pay overtime wages to
present and former  store  managers.  The Company is  vigorously  defending  the
lawsuit.  The Company has also asserted a right of  indemnification  pursuant to
the share purchase  agreement for the acquisition of Frame-n-Lens (See Note 6 to
consolidated financial statements).

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters  were  submitted to a vote of security  holders  during the last
quarter of fiscal 1999.

                                     Page 10
<PAGE>
                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
          MATTERS

     The Company's  common stock was traded on the NASDAQ National Market System
under the symbol "NVAL" from May 1992 until January 4, 1999, when the symbol was
changed to "VSTA". As of October 12, 1999, our common stock began trading on the
NASDAQ SmallCap Market.

     The following  table sets forth for the periods  indicated the high and low
prices  of the  Company's  Common  Stock in the  over-the-counter  market on the
NASDAQ Stock Market.


                  Quarter Ended              High                Low
                  ------------------         ------              ------

Fiscal 1998       April 4, 1998              $7.375              $4.875
                  July 4, 1998               $8.750              $5.000
                  October 3, 1998            $6.750              $4.125
                  January 2, 1999            $6.250              $2.188

Fiscal 1999       April 3, 1999              $6.250              $4.500
                  July 3, 1999               $6.250              $3.625
                  October 2, 1999            $3.938              $2.250
                  January 1, 2000            $2.750              $0.625


     On April 5, 2000,  trading of our common stock was halted after we issued a
press  release  announcing  the  filing  of the  Chapter  11 Cases.  NASDAQ  has
requested that we provide them with certain  information before they will permit
our  common  stock  to  trade.  We  are  considering  whether  to  provide  this
information. If we do not provide the information, it is likely that NASDAQ will
delist our common stock. We anticipate that our common stock would then trade on
the OTC Bulletin Board.

     As of January 1, 2000,  there were  approximately  500 holders of record of
the Company's Common Stock.

     The  Company's  board of directors  presently  intends to use the Company's
cash resources  only for its  operations and expenses  related to its Chapter 11
proceedings.  Future dividend policy will depend upon the earnings and financial
condition of the Company, the Company's need for funds and other factors.


ITEM 6.   SELECTED FINANCIAL DATA

     The following  selected  financial  data of the Company with respect to the
consolidated  financial  statements for the years ended January 1, 2000, January
2, 1999,  January 3, 1998,  December 28, 1996, and December 30, 1995, is derived
from the Company's  consolidated  financial  statements.  The selected financial
data set  forth  below  should  be read in  conjunction  with  the  consolidated
financial statements and notes thereto included elsewhere in this Report.

                                     Page 11
<PAGE>

<TABLE>
<CAPTION>
                                                           1999          1998        1997        1996        1995
                                                          --------   ------------  --------    --------    --------
                                                           <F1>          <F1>     <F1> <F2>      <F1>        <F1>

 <S>                                                    <C>         <C>          <C>          <C>         <C>
 STATEMENTS OF OPERATIONS DATA:
 (In thousands except per share information)
 Net sales                                              $ 329,055   $  245,331  $  186,354   $ 160,376    $ 145,573
 Cost of goods sold                                       147,768      112,929      86,363      76,692       67,966
                                                          --------    --------    --------      -------     -------
 Gross profit                                             181,287      132,402      99,991      83,684       77,607
 Gross profit percentage                                       55%          54%         54%         52%          53%

 Selling, general, and administrative expense             174,462      121,413      89,156      76,920       74,390
 Impairment loss on long lived assets <F3>                  1,952           --          --          --           --
 Provision for doubtful accounts <F3>                       2,700           --          --          --           --
 Provision for dispositions <F3>                               --           --          --          --          958
 Other nonrecurring charges <F3>                               --           --          --          --        1,053
                                                          --------    --------    --------      -------     -------
 Operating income                                           2,173       10,989      10,835       6,764        1,206
 Interest expense, net                                     19,329        5,538       1,554       2,084        2,626
                                                          --------    --------    --------      -------     -------
 Income/(loss) before income taxes and extraordinary item (17,156)       5,451       9,281       4,680       (1,420)
 Income tax expense                                            --        2,037       3,708       1,200          100
                                                          --------    --------    --------      -------     -------
 Income (loss) before extraordinary item                  (17,156)       3,414       5,573       3,480       (1,520)
 Extraordinary item, net of tax                              (406)          --          --          --           --
                                                          --------    --------    --------     -------      -------
 Net income/(loss)                                      $ (17,562)   $   3,414   $   5,573   $   3,480    $  (1,520)
                                                          ========    ========    ========      =======     =======
 Basic earnings/(loss) per common share:
    Earnings/(loss) before extraordinary item           $   (0.81)   $    0.16   $    0.27   $    0.17    $   (0.07)
    Extraordinary loss                                      (0.02)          --          --          --           --
                                                          --------    --------    --------     -------      -------
 Basic earnings/(loss) per common share                 $   (0.83)   $    0.16   $    0.27   $    0.17    $   (0.07)
                                                          ========    ========    ========      =======     =======
 Diluted earnings/(loss) per common share:
    Earnings/(loss) before extraordinary item           $   (0.81)   $    0.16   $    0.27   $    0.17    $   (0.07)
    Extraordinary loss                                      (0.02)          --          --          --           --
                                                          --------    --------    --------      ------      -------
Diluted earnings/(loss) per common share                $   (0.83)   $    0.16   $    0.27   $    0.17    $   (0.07)
                                                          ========    ========    ========      =======     =======
</TABLE>                                     Page 12
<PAGE>
<TABLE>
<CAPTION>
                                                             1999          1998        1997        1996        1995
                                                          --------   ------------  --------    --------    --------
<S>                                       <C>           <C>           <C>       <C>          <C>          <C>
STATISTICAL DATA (UNAUDITED):
 (In thousands except vision center data) Domestic vision centers open at end of
 period:
    Leased department vision centers                           577         562         364         320          319
    Free-standing vision centers                               322         331          50          --           --
 Average weekly consolidated sales
    per leased department vision center <F4>            $    8,200    $  9,000  $    9,400   $   9,300    $   8,700
Average weekly consolidated sales
    per free-standing vision center <F4>                $    4,700    $  4,900  $       --   $      --    $      --

 Capital expenditures                                   $   12,704    $  9,183  $    8,049   $   2,713    $  13,175
 Depreciation and amortization                              18,602      14,177      11,035      10,058       10,378
 EBITDA <F5>                                                20,775      25,166      21,870      16,822       11,584
    EBITDA margin percentage                                   6.3%       10.3%       11.7%       10.5%         8.0%
 EBITDA prior to significant provisions <F5>                25,427      25,166      21,870      16,822       13,595
    EBITDA margin percentage
     prior to significant provisions <F5>                      7.7%       10.3%       11.7%       10.5%         9.3%
 Total annual sales growth                                    34.1%       31.6%       16.2%       10.2%        21.9%

 BALANCE SHEET DATA:
 (In thousands except vision center data)
 Working capital                                        $  (11,714)   $  4,208  $   12,171    $ 13,502    $  14,556
 Total assets                                              220,219     229,097      83,250      74,564       81,237
 Current and long-term debt
    obligations <F6>                                       151,902     139,608      24,973      26,500       38,480
 Shareholders' equity                                       26,557      43,927      35,598      29,906       26,326
 Total debt and lease obligations as a
    percentage of total capital <F7>                            85%         76%         41%         47%          59%


<FN>
<F1> Financial  information  for 1995 and  subsequent  years include  results of
     international  operations  for the 12 months ended November 30. (see Note 2
     to consolidated financial statements.)

<F2> Effective January 1, 1995, the Company changed its year end to a 52/53 week
     retail calendar (see Note 2 to consolidated financial  statements).  Fiscal
     1997  consisted of 53 weeks ended January 3, 1998.  Sales for the 53rd week
     approximated $3.0 million in fiscal 1997.

<F3> In 1999, the Company recorded a $2.7 million provision for the write-off of
     certain  receivables  and an impairment  loss of $1.9 million in connection
     with 36  under-performing  vision centers.  In 1995, the Company decided to
     dispose of its  non-core  business  operations,  resulting  in a $2 million
     provision.

<F4> Calculated  from  sales from each  month  during the period  divided by the
     number of store weeks of sales during the period, excluding stores not open
     a full month.

<F5> EBITDA is calculated as earnings before interest,  taxes,  depreciation and
     amortization.  EBITDA prior to  significant  provisions  is  calculated  as
     EBITDA prior to provisions described per Note 3 above.

<F6> Current  and  long-term  debt  obligations  include  the  Revolving  Credit
     Facility and term loan,  Senior Notes,  Redeemable  Common Stock, and other
     long-term debt and capital lease obligations.

<F7> Total Capital is calculated as total current and long-term debt and capital
     lease obligations combined with total shareholders' equity.
</FN>
</TABLE>                               Page 13
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

Proceedings Under Chapter 11 of the Bankruptcy Code

     On April 5, 2000, the Company and ten of its  subsidiaries  filed voluntary
petitions with the  Bankruptcy  Court for  reorganization  under Chapter 11. The
Chapter 11 Cases have been consolidated for the purpose of joint  administration
under Case No. 00-65214. The Debtors are currently operating their businesses as
debtors-in-possession  pursuant to the Bankruptcy Code. All affiliated  entities
of the  Company  are  included  in the  Chapter 11 Cases,  except only (a) three
subsidiaries  which are  licensed  managed  care  organizations  and (b) foreign
subsidiaries of the Company.

     The Debtors expect to file a reorganization  plan or plans that provide for
emergence from bankruptcy in 2000 or 2001. There can,  however,  be no assurance
that a reorganization plan or plans will be proposed by the Debtors or confirmed
by the Bankruptcy Court, or that any such plan(s) will be consummated. A plan of
reorganization  could result in holders of the common  stock  receiving no value
for their  interests.  Because  of such  possibilities,  the value of the common
stock is highly speculative.

     At a hearing held on April 5, 2000,  the  Bankruptcy  Court entered  orders
granting  authority to the  Debtors,  among other  things,  to maintain our cash
management  system,  to  pay  pre-petition  and  post-petition  employee  wages,
salaries, benefits and other employee obligations, and to honor customer service
programs, including warranties,  returns, and gift certificates.  The Bankruptcy
Court also  ordered  that the Company  could  enter into a  debtor-in-possession
credit facility in substantially  the form as presented to the Court. See Note 3
of Notes to  Consolidated  Financial  Statements  and the Report of  Independent
Public Accountants included herein.

     We cannot  predict the  outcome of the Chapter 11 Cases or their  effect on
the  Company's  business.  See Item 1 - "Business - Chapter 11 Cases," Note 3 of
Notes to Consolidated  Financial Statements and the Report of Independent Public
Accountants  included  herein.  If the liabilities  subject to compromise in the
Chapter 11 Cases  exceed the fair value of the assets,  unsecured  claims may be
satisfied  at less than 100% of their  face  value and the  common  stock of the
Company may have no value.

Consolidated Financial Statements

     The Company's  Consolidated  Financial  Statements  have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets and  liquidation of liabilities  and  commitments in the normal course of
business.  The filing of the bankruptcy petition,  the related circumstances and
the losses from operations raise substantial doubt with respect to the Company's
ability to continue as a going concern.  The  appropriateness of using the going
concern basis is dependent upon,  among other things,  confirmation of a plan or
plans  of  reorganization,  future  profitable  operations  and the  ability  to
generate  cash  from  operations  and  financing  sources   sufficient  to  meet
obligations. As a result of the filing of the Chapter 11 Cases and related

                                     Page 14
<PAGE>
circumstances,  realization of assets and  liquidation of liabilities is subject
to  significant  uncertainty.  While  under the  protection  of Chapter  11, the
Debtors  may sell or  otherwise  dispose  of  assets,  and  liquidate  or settle
liabilities,  for  amounts  other  than  those  reflected  in  the  Consolidated
Financial  Statements.   Further,  a  plan  or  plans  of  reorganization  could
materially  change  the  amounts  reported  in  the  accompanying   Consolidated
Financial Statements.  The Consolidated  Financial Statements do not include any
adjustments relating to recoverability of the value of recorded asset amounts or
the amounts and  classification  of  liabilities  that might be  necessary  as a
consequence of a plan of reorganization.

Results of Operations

     As of January 1, 2000,  we operated 926 vision  centers,  versus 919 vision
centers at January 2, 1999.  Our results  for the  three-year  period  discussed
below were significantly  affected by our acquisitions of Frame-n-Lens  Optical,
Inc. and New West Eyeworks,  Inc. (the  "Acquired  Businesses")  in 1998.  These
entities  had  combined  revenues of $125  million for all of 1998 and  operated
approximately 455 vision centers at the time of the acquisitions. (See Note 6 to
consolidated financial statements.) These acquisitions, and the substantial debt
incurred by the Company to fund them, have had a substantial  negative impact on
our operating results and cash flow.

YEAR ENDED JANUARY 1, 2000 COMPARED TO YEAR ENDED JANUARY 2, 1999

     NET SALES. The Company recorded net sales of $329.1 million in fiscal 1999,
an  improvement of 34% over sales of $245.3 million in fiscal 1998. We increased
sales for two reasons.  First,  in 1999 our net sales  included the net sales of
our Acquired  Busineses  for the entire  fiscal year,  whereas our net sales for
1998  included  the sales of the acquired  businesses  for only a portion of the
year. Second,  our sales in our core leased  departments  increased by 4.1% over
1998 results.

     NET SALES IN ACQUIRED  BUSINESSES.  We believe that the  performance of the
Acquired Businesses  represents the most important  operational challenge facing
the  Company.   In  1999,  the  integration  of  these   businesses  fell  below
expectations  which negatively  affected our results.  The most important reason
for the disappointing performance was the significant shortfall in sales.

     The following factors contributed to our poor operating results.

   - The  consolidation  of three  different  retail  concepts into one existing
     concept proved more difficult than we anticipated.

   - We  underestimated  the power of the  existing  trade names of the acquired
     businesses  and lost market share when we changed the store names to "Vista
     Optical".

   - We incurred  significant  service  disruptions  when we closed three of our
     manufacturing locations and consolidated their operations into our existing
     facilities.

                                     Page 15
<PAGE>

   - We had  substantial  turnover  at the field and  management  levels,  which
     further disrupted our operations.

     In 1999,  we made a number of  changes  to  improve  these  businesses.  In
particular, we:

   - improved the inventory carried by these vision centers.

   - recruited optometrists to many locations.

   - instituted intensive training programs for retail personnel.

   - created a new advertising campaign, which began running in early 2000.

     We  believe  that the  acquired  businesses  will need  additional  time to
benefit from these changes.  If sales at the acquired businesses do not improve,
the  Company's  liquidity  and  profitability  will  continue  to  be  adversely
affected. (See - "Liquidity and Capital Resources".)


     GROSS PROFIT.  In 1999, we increased gross profit to $181.3 million,  a 37%
increase over $132.4  million in 1998.  The increase in net sales resulted in an
increase in gross profit dollars. Our gross profit percentage increased from 54%
in 1998 to 55.1% in 1999. Several factors contributed to this increase:

   - We have increased our purchasing power since completing the acquisitions.

   - The  consolidation of our  manufacturing  operations from six facilities to
     three facilities has reduced our average lens cost.

   - We received significant promotional payments from key vendors.

     Other factors had a negative impact on gross profit percentage:

   - Retail prices for contact  lenses  continued to decline  because of intense
     price competition.

   - During the  consolidation  of our  manufacturing  operations,  our  service
     declined,  causing an  increase  in remake and  warranty  work on  customer
     orders.

   - Shortfalls in sales at the acquired vision centers caused rent as a percent
     of sales to increase.

     SELLING,  GENERAL,  AND  ADMINISTRATIVE  EXPENSE.  This category of expense
includes  both retail  operating  expense and  corporate  office  administrative
costs.  SG&A expense  increased from $121.4 million in 1998 to $177.2 million in
1999.  The  increase was  primarily  due to the increase in the number of vision
centers. As a percent of net sales, SG&A expense increased from 49.5% in 1998 to
53.8% in 1999. This increase was due to:

                                     Page 16
<PAGE>

   - A decline in sales at the acquired  businesses,  which thereby caused store
     payroll to increase as a percent of sales.

   - An increase in goodwill  amortization from $800,000 in 1998 to $3.5 million
     in 1999 (this increase reflects the goodwill associated with the businesses
     acquired by the Company in 1998 and  therefore  amortized  over all of 1999
     versus a portion of 1998).

   - SG&A  includes  a  non-cash  expense  provision  of  $2.7  million  for the
     write-off of managed care  receivables.  During 1999, the Company continued
     its efforts with its third party  processor to timely collect  managed care
     receivable  accounts.  In the fourth  quarter,  management  concluded these
     efforts  were  not  achieving   anticipated   results  and,   consequently,
     determined an additional provision for doubtful accounts was warranted.  We
     do not  expect  to incur  any  additional  charges  of this  magnitude  for
     write-offs of managed care receivables,  although additional write-offs are
     possible.

     We believe that all our vision centers are adequately  staffed and that, if
sales  increase,  payroll  should  decline as a percent of sales.  In  addition,
before giving effect to goodwill amortization,  home office expense as a percent
of sales decreased by 0.5% over levels recorded in 1998.

     Results  for  1999  include  a  non-cash  charge  of  $1.9  million,  which
represents an impairment loss on fixed assets associated with 36 underperforming
vision  centers  acquired by the Company.  We expect to be closing a significant
number of these vision centers shortly.

     We  do  expect  additional  charges  associated  with  the  closure  of  36
underperforming  vision  centers.  Such  charges  would  primarily  be  for  the
settlement of lease obligations.

     We are currently evaluating additional  underperforming stores for possible
closure in 2000 and have  identified  at least an  additional 50 stores which we
expect to close during the second quarter.  The final plan to close these vision
centers will include additional charges for the impairment of assets, consisting
primarily of leasehold  improvements  and furniture  and  fixtures,  and for the
settlement of the related lease  obligations.  The number of vision  centers and
the aggregate costs to close are currently undetermined.

     OPERATING  INCOME.  Operating  income  decreased  to $2.2  million from $11
million in 1998.  Operating  margin  decreased from 4.5% to 0.7% of net sales in
1999.  The  decrease  was  attributable  to:

   - The  shortfall  in  operating  results of the  acquired  businesses.  - The
   increase in SG&A expense  discussed above. - The non-cash  charges  discussed
   above.

     Despite  poor results in the acquired  businesses,  we increased  operating
income in our core leased business more than 10% over levels recorded in 1998.

                                     Page 17
<PAGE>

     INTEREST  EXPENSE.  Interest  expense  increased to $19.3 million from $5.5
million in 1998.  The Company  issued its $125 million senior notes in 1998 (See
Note 6 to consolidated financial statements) and incurred the associated expense
over the  entirety  of 1999  versus a portion of 1998.  In  November  1999,  the
Company  refinanced its secured credit  facility at a higher  interest rate than
that provided for in its previous credit  facility.  (See "Item  7-Liquidity and
Cash Resources".)

     PROVISION FOR INCOME TAXES.  Vista recorded a pre-tax operating loss before
extraordinary  item of $17.2 million in 1999.  The resulting  income tax benefit
was approximately $5.2 million.  We have established a valuation allowance equal
to the amount of the tax benefit.

     EXTRAORDINARY  LOSS. Results also include an extraordinary loss of $406,000
associated  with the write-off of the  capitalized  costs of the Company's  1998
secured credit facility.

     NET INCOME.  The Company  recorded a net loss of $17.6  million,  or a loss
of $(0.83) per basic and diluted share.


YEAR ENDED JANUARY 2, 1999 COMPARED TO YEAR ENDED JANUARY 3, 1998

Consolidated Results

     NET SALES.  Net sales during fiscal 1998  increased to $245.3  million from
$186.4   million  in  fiscal  1997.  The  increase  was  primarily  due  to  the
acquisitions of Frame-n-Lens  and New West in 1998 and a full year of operations
from Midwest Vision which was acquired in October 1997.  Comparable  store sales
in leased  departments  increased  by 3% over levels  recorded  in fiscal  1997.
Consolidated  average  weekly net sales per leased vision center  decreased from
$9,400 during  fiscal 1997 to $9,000 in fiscal 1998,  primarily as the result of
acquired vision centers with lower net sales levels.  Vision centers acquired in
the Frame-n-Lens  acquisition  recorded  significant  negative  comparable store
sales  and  had  a  negative  impact  on  results  following  the  date  of  the
acquisition. This trend had a negative impact on earnings and liquidity in 1998.

     For the core  leased  departments,  average  spectacle  unit sales per week
increased  and the  average  spectacle  transaction  value  decreased  over that
recorded in fiscal 1997,  resulting  in a net  increase in  spectacle  sales for
stores open for more than one year.  Contact lens unit sales  increased over the
prior year,  but such  increase was more than offset by a decline in the average
transaction value on disposable contacts resulting from competitive  pressure on
pricing. Sales under managed care plans increased over levels recorded in 1997.

                                     Page 18
<PAGE>
     GROSS PROFIT.  Gross profit increased to $132.4 million in fiscal 1998 from
$100 million in fiscal  1997.  The increase was due to the increase in net sales
described  above.  Gross profit  percentage  essentially  remained  even against
levels  recorded in fiscal 1997.  Promotional  monies from vendors and increased
manufacturing  efficiencies had a positive impact on gross profit. However, this
was partially  offset by the lower gross profit  recorded at the vision  centers
acquired by the Company in 1998.

     SELLING,  GENERAL, AND ADMINISTRATIVE EXPENSE. SG&A expense (which includes
both operating expenses and home office overhead) increased to $121.4 million in
1998  from  $89.2  million  in 1997.  As a  percentage  of sales,  SG&A  expense
increased from 47.8% in 1997 to 49.5% in 1998.  Administrative  costs  increased
because of the  acquisitions of Frame-n-Lens  and New West. SG&A expense in 1998
included $800,000 of goodwill  amortization relating to the recent acquisitions.
Store  expense as a percentage  of sales was  negatively  affected by the vision
centers  recently  acquired,  which had higher store expenses as a percentage of
sales than did the Company's other vision centers.  SG&A expense as a percentage
of net sales was positively  affected by reduced  incentive  payment levels as a
result of the  Company's  lower  earnings  in 1998  versus  1997.  Additionally,
reserves associated with managed care receivables were increased.

     OPERATING  INCOME.  Operating  income for fiscal  1998  increased  to $11.0
million  from  $10.8  million  in fiscal  1997.  As a  percentage  of net sales,
operating  income  declined  to 4.5% from 5.8% in fiscal  1997.  The decline was
primarily  due to the  increase in SG&A expense  discussed  above and lower than
expected  operating  margins  from  Frame-n-Lens.  Before  giving  effect to the
businesses  acquired in 1998,  operating  income in 1998  improved 21 percent to
$13.1  million  from $10.8  million  recorded  in 1997.  The  Company's  Mexican
business  operated at a break-even level in 1998,  essentially flat against 1997
results.  Mexican operating results do not include allocated corporate overhead,
interest, and taxes.

     OTHER  EXPENSE.  Other expense  increased from $1.6 million in 1997 to $5.5
million in 1998,  primarily as a result of the interest  expense  arising out of
the  issuance  of the  Company's  senior  notes in  October  1998 (see Note 6 to
consolidated financial statements).

     PROVISION FOR INCOME TAXES.  The effective  income tax rate on consolidated
pretax income was 37% in 1998 versus 40% in 1997, primarily as the result of the
1998 operating losses from  Frame-n-Lens and New West. In 1998, the Company made
cash  payments  for  federal  and  state  income  taxes   approximating  30%  of
consolidated  pretax  earnings  primarily due to the  utilization of alternative
minimum tax credits.

     NET INCOME. Net income was $3.4 million, or $0.16 per share, as compared to
net income of $5.6 million, or $0.27 per share, in 1997.

                                     Page 19
<PAGE>
Inflation

     Although the Company cannot determine the precise effects of inflation,  it
does not believe  inflation has had a material  effect on its domestic  sales or
results of operations.  The Company cannot determine whether inflation will have
a material  long-term  effect on its sales or results of  operations.  Continued
inflation in Mexico may cause consumers to reduce  discretionary  purchases such
as eyeglasses.

     As a result  of  inflation  in prior  years,  the  Company  has in the past
adjusted its retail  pricing.  Further  pricing  adjustments are contingent upon
competitive  pricing  levels in the  marketplace.  Management is monitoring  the
continuing impact of these inflationary trends.

LIQUIDITY AND CAPITAL RESOURCES

     Our capital needs have been for operating expenses,  capital  expenditures,
and  acquisitions  and interest  expense.  Our sources of capital have been cash
flow from operations and borrowings under our credit facilities.

     In October 1998, we issued our $125 million notes due 2005 to help fund our
acquisitions of  Frame-n-Lens  Optical,  Inc. and New West Eyeworks,  Inc. These
notes bear  interest of 12.75% and were issued  pursuant to an  indenture  which
contains a variety  of  customary  provisions  and  restrictions  (See note 6 to
consolidated  financial  statements).  Interest payments are due on April 15 and
October 15 of each year.  The  indenture  also gives us a 30 day grace period in
which to make interest payments.  We must pay penalty interest if we go into the
grace period.

     At the time we issued our notes, we also entered into a $25 million secured
credit facility.  The agreement contained customary  provisions and restrictions
(See Note 6 to consolidated financial statements).

     In October 1999, we announced  that,  because of slow sales in the acquired
businesses,  we would use the 30 day grace period contained in the indenture. We
also announced that we had breached various provisions of our credit facility.

     We then entered into a replacement  credit  facility with Foothill  Capital
Corporation (the "Foothill Credit Facility"),  and we used proceeds from the new
facility to make the October 15 interest  payment under the notes and to pay off
the  balance  under the prior  credit  facility.  As of January 1, 2000,  we had
borrowed $19.3 million under this credit facility.

     The Foothill  Credit Facility was in the amount of $25 million and included
a $12.5 million revolver and $12.5 million term loan. Our obligations  under the
Foothill  Credit  Facility  were  secured  by  substantially  all  assets of the
Company. The facility contained customary provisions and restrictions, including
restrictions on the amount we can borrow under the revolver  portion (See Note 6
to consolidated financial statements).

                                     Page 20
<PAGE>

     As of January 1, 2000, we had breached a cash flow and a net worth covenant
in the Foothill Credit Facility. On April 5, 2000, the Debtors filed the Chapter
11 Cases.  We expect that the filing of these  cases will  affect the  Company's
liquidity and capital resources in fiscal 2000.

     On April 5, 2000, the Bankruptcy  Court entered an interim order permitting
the Company to enter into debtor-in  possession  financing with Foothill Capital
Corporation  (the "DIP  Facility").  The DIP Facility  remains  subject to final
Bankruptcy  Court  approval.  A hearing for this purpose has been set for May 3,
2000.  See Item 1 - "Business  - Chapter 11 Cases." If and when  approved by the
Bankruptcy  Court in a final order,  the DIP Facility will refinance all amounts
previously outstanding under the Foothill Credit Facility and provide additional
working  capital.  As of April 5, 2000, we had borrowed a total of $15.4 million
(inclusive  of the $12.5 million term loan  portion)  under the Foothill  Credit
Facility.

     Under the DIP Facility, the Company may borrow up to $25 million (inclusive
of amounts  outstanding under the Foothill Credit Facility),  subject to certain
limitations,  to  fund  ongoing  working  capital  needs  while  it  prepares  a
reorganization  plan.  The DIP Facility  includes a maximum of $12.5  million in
revolving  loans.  The DIP  Facility  also  contains a $12.5  million  term loan
bearing  interest at 15% per annum.  The DIP Facility  requires that the Company
have a rolling  twelve month EBITDA of no less than $15 million during its term,
which  expires on May 31,  2001.  Events  occuring in the Chapter 11 Cases could
result  in  earlier  termination.   The  DIP  Facility  includes  a  $4  million
sub-facility  for letters of credit.  Interest rates on the revolver  portion of
the DIP Facility are based on either the Wells Fargo Bank,  N.A.  Base Rate plus
2% or the Adjusted  Eurodollar  Rate plus 3.25%.  The DIP Facility is secured by
substantially  all of the assets of the  Company and its  subsidiaries,  subject
only to valid,  enforceable,  subsisting and non-voidable  liens of record as of
the date of commencement of the Chapter 11 Cases and other liens permitted under
the DIP Facility.

     The DIP Facility  contains  customary  covenants  including,  among others,
covenants restricting the incurrence of indebtedness,  the creation or existence
of liens,  the guarantee of other  indebtedness,  the  declaration or payment of
dividends,  the  repurchase or  redemption of debt and equity  securities of the
Company, change in business activities,  affiliate  transactions,  change in key
management and certain  corporate  transactions,  such as sales and purchases of
assets,  mergers,  or  consolidations.  The DIP  Facility  also  limits  capital
expenditures,  investments,  prepayments of other indebtedness, and requires the
delivery of financial and other  information to Foothill.  The DIP Facility also
contains  certain  customary  default  provisions  and  also  specifies  certain
possible  occurrences  in the Chapter 11 Cases  which could  result in events of
default.

     Availability  under the DIP Facility is limited to certain  percentages  of
accounts receivable and inventory, subject to other limitations based on rolling
twelve-month historical EBIDTA and rolling 60-day cash collections.

     The Company  believes the DIP Facility (if approved by the Bankruptcy Court
in a final  order)  should  provide it with  adequate  liquidity  to conduct its
operations  while it prepares a  reorganization  plan.  However,  the  Company's
liquidity, capital resources, results of operations and ability to continue as a
going concern are subject to known and unknown risks and uncertainties. See Item
7 -  "Management's  Discussion  and  Analysis  and Results of  Operations - Risk
Factors."

                                     Page 21
<PAGE>
     Accordingly,  we are working to improve the Company's current and long-term
liquidity. We are preparing a plan of reorganization,  which will likely include
the conversion of debt into equity.  We do not know if the  reorganization  plan
will be approved, and if approved, we do not know if it will succeed.

     Even if the  reorganization  plan is successful in improving our liquidity,
we will have to take steps to improve  the  Company's  operating  results in the
Acquired Businesses. Our initial plans include improving sales and profitability
in  the   Acquired   Businesses   in   conjunction   with   closing   additional
underperforming stores with sizeable losses.

     Although  management  believes that its actions will have a positive impact
on the Company's operations,  there can be no assurance that the Company will be
able to operate profitably.

     If the Company is successful in restructuring  its debt obligations and its
equity,  the Company may trigger  limitations  on certain tax net operating loss
carryforwards. (See Note 11 to consolidated financial statements).

     We plan, as of January 1, 2000, to open  approximately  18 Wal-Mart  vision
centers  during  fiscal 2000.  We may open up to 12  additional  vision  centers
dependent upon liquidity, construction schedules and other constraints. For each
of our new vision centers,  we typically spend between $100,000 and $160,000 for
fixed assets and approximately $25,000 for inventory. In general,  free-standing
locations  are more costly than leased  locations.  We also spend  approximately
$20,000 for pre-opening  costs.  Before 1998, we capitalized  these  pre-opening
costs.  Beginning in 1998, we expensed them as required by new accounting  rules
(See Note 2 to consolidated financial statements).


IMPACT OF THE YEAR 2000 ISSUE

     The  transition  to the  year  2000  has  had no  impact  on the  Company's
operations.  All of the  Company's  hardware  and  software  functioned  without
incident during and after the transition.  The Company's point of sale system is
year 2000 compliant.

     Similarly,   none  of  the  Company's  business   relationships  have  been
materially  affected by transition to the year 2000.  Inventory  continues to be
shipped and billed  properly.  We have no basis to believe that our business has
been or will be adversely affected by year 2000 issues.

  Costs to Address Year 2000 Issues

     To prepare the Company for year 2000, we spent  approximately  $1.1 million
for changes to software and hardware and for various services.

                                     Page 22
<PAGE>
  Risks of Third-Party Year 2000 Issues

     We  believe  that  our  business  partners  have  made  their  systems  Y2K
compliant. We obviously cannot predict whether they will incur any Y2K problems.
Our business could be adversely affected if such problems occur.

DERIVATIVE FINANCIAL INSTRUMENTS

Market Risk

     Market risk is the potential change in an instrument's value caused by, for
example,  fluctuations in interest and currency  exchange  rates.  The Company's
primary market risk exposures are interest rate risk and the risk of unfavorable
movements  in  exchange  rates  between the U.S.  dollar and the  Mexican  peso.
Monitoring and managing these risks is a continual process carried out by senior
management,  which reviews and approves the Company's risk management  policies.
We  manage  market  risk on the  basis of an  ongoing  assessment  of  trends in
interest  rates,  foreign  exchange  rates,  and economic  developments,  giving
consideration  to possible  effects on both total return and reported  earnings.
The Company's  financial advisors,  both internal and external,  provide ongoing
advice regarding trends that affect management's assessment.

Interest Rate Risk

     The Company  borrows  long-term debt under our credit  facility at variable
interest rates. (See Note 8 to consolidated  financial statements.) We therefore
incur the risk of increased interest costs if interest rates rise.

     In  anticipation  of the issuance of our senior  notes,  in 1998 we entered
into three  anticipatory  hedging  transactions  with a notional  amount of $100
million.  The interest  rates on these  instruments  were tied to U.S.  Treasury
securities  and ranged from 5.43% to 5.62%.  We settled these  transactions  for
approximately  $4.6  million  in  September  1998  with  $0.6  million  cash and
additional  borrowings  of $4.0  million.  The  settlement  costs are treated as
deferred financing costs amortized over the life of the notes.

Foreign Exchange Rate Risk

     Historically,  Mexico qualified as a highly inflationary  economy under the
provisions  of SFAS No. 52 -- Foreign  Currency  Translation.  Consequently,  in
1997, the financial  statements of the Mexico operation were remeasured with the
U.S. dollar as the functional currency.  Since 1997, we have recorded immaterial
losses  because of changes in foreign  currency  rates  between the peso and the
U.S. dollar.

                                     Page 23
<PAGE>
RISK FACTORS

     This Form 10-K  contains a number of statements  about the future.  It also
contains  statements  which  involve  assumptions  about the  future.  All these
statements  are  forward  looking  statements  within the meaning of the Private
Securities Litigation Reform Act of 1995.  Forward-looking  statements represent
our expectations or belief  concerning  future events,  including the following:
any  statements  regarding  future sales levels,  any  statements  regarding the
continuation of historical  trends,  and any statements  regarding the Company's
liquidity.  Without limiting the foregoing, the words "believes," "anticipates,"
"plans,"   "expects,"   and  similar   expressions   are  intended  to  identify
forward-looking statements.

     We do not know  whether the  forward-looking  statements  made in this Form
10-K will prove to be correct. We have tried to identify factors which may cause
these  statements  to be  incorrect.  These  factors  could also have a negative
impact on our results. The following is our list of these factors:

   - We have filed for protection  under Chapter 11 of the Bankruptcy  Code. The
     fact of this filing,  along with the process through the Bankruptcy  Court,
     could affect our business in a variety of unforeseen  ways.  There could be
     impairment of our ability to:  operate our business  during the pendency of
     the  proceedings;  continue normal  operating  relationships  with our host
     licensors,  such as Wal-Mart;  obtain  shipments and  negotiate  terms with
     vendors;  fund, develop,  and execute an operating plan; attract and retain
     key executives and  associates;  maintain our gross margins  through vendor
     participation  programs  and  otherwise  to maintain  favorable  courses of
     dealing with vendors.

   - We expect  that,  under the plan of  reorganization  we will propose to the
     Bankruptcy  Court,  the equity of the current  shareholders  in the Company
     will be significantly diluted.

   - It is  unlikely  the our  common  stock will  continue  to be listed on the
     NASDAQ SmallCap Market. We anticipate that our shares will trade on the OTC
     Bulletin  Board.  The  liquidity  of our common  stock  could be  adversely
     affected as a result.

   - There are various risks  associated with the Chapter 11 Cases.  Our plan of
     reorganization  may not be  approved  or, even if it is  approved,  may not
     succeed.  In  addition,  the  Bankruptcy  Court  must  enter a final  order
     approving our DIP Facility.


                                     Page 24
<PAGE>


   - We  depend  heavily  on our host  store  relationships,  particularly  with
     Wal-Mart.  Any  change  in these  relationships  could  have a  significant
     negative  impact on our business.  The filing of the Chapter 11 Cases could
     affect those relationships.

   - The  businesses we acquired in 1998  continue to generate low sales.  If we
     cannot improve these sales, we may not generate sufficient cash to continue
     in  business.  We might then be forced to convert the Chapter 11 Cases into
     proceedings under Chapter 7 of the Bankruptcy Code. In addition, even if we
     are able to pay our  bills,  we may not be able to expand our  business  if
     these low sales levels persist.

   - Our new debtor-in-possession  credit facility includes a revolver loan. Our
     ability  to  borrow  under the  revolver  portion  is  limited  to  certain
     percentages  of our inventory and accounts  receivable.  These  limitations
     could restrict our ability to borrow under this revolver portion.

   - Managed care plans are increasingly  important in the optical industry.  We
     will need to  attract  new  managed  care  business  if we intend to remain
     competitive.  We will  also  need  to  retain  our  existing  managed  care
     arrangements.  Loss of these  arrangements,  or our  failure to attract new
     managed care business, would impair our competitive position. The filing of
     the Chapter 11 Cases could impair our ability to retain existing  contracts
     and to enter into new ones.

   - We depend on reliable and timely reimbursement of claims we submit to third
     party payors. There are risks we may not be paid on a timely basis, or that
     we will be  paid  at all.  Some  plans  have  complex  forms  to  complete.
     Sometimes  our  staff  may  incorrectly   complete   forms,   delaying  our
     reimbursement.  These  delays  can hurt our cash flow and also  force us to
     write-off more of these accounts receivable.

   - Each year, we expect to have increasing numbers of vision centers under our
     Wal-Mart agreement come up for renewal.  Our rental obligations to Wal-Mart
     will  increase  in the option  period.  We will need to continue to improve
     sales at these vision centers. If we do not, our rent as a percent of sales
     will increase significantly during the option period. Alternatively, we may
     choose not to exercise the options.

   - A number of our leases for our  free-standing  vision  centers  have annual
     rent increases or provide for increased rent in option periods. We may need
     to consider closing locations or not renewing others unless we can increase
     their sales levels.

   - Operating factors affecting  customer  satisfaction and quality controls of
     the Company in optical manufacturing.

   - Risks   associated  with  the  Company's  Year  2000  compliance   program,
     including,  without limitation,  the risks that third parties with whom the
     Company deals will not have systems which are Year 2000 compliant.

                                     Page 25
<PAGE>
   - Risks that the  Company's  new point of sale  system  will not  function as
     planned. In addition,  we could lose sales because employees are unfamiliar
     with the new system or because they have difficulty using it.

   - Pricing  and other  competitive  factors,  including,  without  limitation,
     increased price competition with respect to contact lenses.

   - Technological  advances  in the  eyecare  industry,  such  as new  surgical
     procedures  or  medical  devices,  which  could  reduce  the demand for the
     Company's  products.  The number of individuals  electing Lasik and similar
     surgical  procedures has dramatically  increased each year. If these trends
     continue, demand for our goods and services could decrease significantly.

   - The mix of goods sold.

   - Availability  of optical and  optometric  professionals.  An element of the
     Company's business strategy and a requirement of the Wal- Mart Agreement is
     the  availability of vision care  professionals at clinics in or nearby the
     Company's vision centers.

   - State  and  federal  regulation  of  managed  care and of the  practice  of
     optometry and opticianry.

   - General risks arising from  investing and operating in Mexico,  including a
     different regulatory,  political,  and governmental  environment,  currency
     fluctuations,  high  inflation,  price  controls,  restrictions  on  profit
     repatriation,  lower per capita income and spending levels,  import duties,
     value added taxes, and difficulties in cross-cultural marketing.

   - The  Company's  ability  to  select  in-stock  merchandise   attractive  to
     customers.

   - Weather affecting retail operations.

   - Variations  in the level of  economic  activity  affecting  employment  and
     income levels of consumers.

   - Seasonality of the Company's business.

Recent Accounting Pronouncements

     In  December  1999,  the SEC issued  Staff  Accounting  Bulletin  No.  101,
"Revenue Recognition in Financial Statements." SAB 101 summarizes the SEC's view
in  applying  generally  accepted  accounting  principles  to  selected  revenue
recognition  issues.  We are  required  to apply the  guidance in SAB 101 to our
financial  statements no later than the second quarter of 2000. We currently are
reviewing  the  requirements  of  SAB  101  and  assessing  its  impact  on  our
consolidated  financial  statements.  We anticipate  reporting the impact in the
second  quarter of 2000 as a cumulative  effect  adjustment to our  consolidated
financial statements resulting from a change in accounting principles.

                                     Page 26
<PAGE>
     Effective in 1997, the Company  adopted  Statement of Financial  Accounting
Standards  No. 128 ("SFAS  128")  "Earnings  per Share" and No. 129 ("SFAS 129")
"Disclosure  of  Information  and Capital  Structure."  SFAS 128  simplifies the
calculation of basic  earnings per common share and diluted  earnings per common
share.  Additionally,  disclosure is required presenting a reconciliation of the
computations  for basic and diluted  earnings  per common  share.  The change in
calculations  did not change the  Company's  reported  earnings per common share
amounts  presented  in previous  filings.  SFAS 129 requires  disclosure  of the
pertinent  rights and  privileges of all securities  other than ordinary  common
stock.  The Company has disclosed  such  information  in previous  years' annual
reports filed on Form 10-K.

     In July 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting Standards No. 130 ("SFAS 130"),  "Reporting  Comprehensive
Income." The statement  addresses the reporting and display of changes in equity
that result from transactions and other economic events,  excluding transactions
with owners.  The adoption of SFAS No. 130 did not have a material impact on the
Company's financial statements,  as comprehensive income was equal to net income
in 1999, 1998 and 1997.

     Effective in 1997, the Company  adopted  Statement of Financial  Accounting
Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and
Related  Information." The statement  addresses reporting of segment information
(See Note 16 to consolidated financial statements).

     In 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  133  ("SFAS No.  133"),  "Accounting  for
Derivative  Instruments and Hedging  Activities." SFAS No. 133 will be effective
in fiscal 2000.  The Company is  evaluating  the effects of the adoption of this
recent pronouncement.

ITEM  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  Consolidated  Financial  Statements  of the Company are  included as a
separate section of this Report commencing on page F-1.

ITEM  9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

   None.

                                     Page 27
<PAGE>
                               PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>


Information Concerning Directors
<S>                                      <C>
     Name and Age as of March 1, 2000     Position, Business Experience and Directorships

     James W. Krause............55        Joined  the  Company in April  1994 as  President  and Chief  Executive  Officer  and a
                                          director.  He was named Chairman of the Company in June 1995.

     David I. Fuente............54        A director  since  April  1992,  Mr.  Fuente has been  Chairman  of the Board and Chief
                                          Executive  Officer of Office  Depot,  Inc.  since 1987.  He also serves on the Board of
                                          Directors for Ryder Systems,  Inc. Mr. Fuente has decided to leave the Board  effective
                                          the date of the meeting.

     Ronald J. Green............52        A director since December 1990, Mr. Green has been a partner in the accounting  firm of
                                          Stephen M. Berman & Associates, Atlanta, Georgia, since 1980.

     James E. Kanaley...........58        A director  since  October  1998,  Mr.  Kanaley was employed at Bausch & Lomb Inc. from
                                          1978 until his  retirement  in 1997.  From 1990 until  1993,  he served as Senior  Vice
                                          President and Group President  Contact Lens Care, and from 1993 until his retirement he
                                          served as Senior Vice President and President, North American Healthcare.

     Campbell B. Lanier, III....49        A director  since October 1990,  Mr.  Campbell B. Lanier,  III is Chairman of the Board
                                          and Chief  Executive  Officer of ITC Holding  Company,  a  telecommunications  services
                                          company located in West Point,  Georgia.  He is also Chairman,  Chief Executive Officer
                                          and director of Powertel, Inc. He also serves as a director of EarthLink, Inc.

     J. Smith Lanier, II........72        A director since October 1990,  Mr. J. Smith Lanier,  II is Chairman of J. Smith Lanier
                                          & Co., an insurance sales company. He is also a director of Interface,  Inc. Mr. Lanier
                                          is the uncle of Campbell B. Lanier, III.

     Peter T. Socha.............40        Mr.  Socha  joined the Company in October,  1999 as Senior  Vice  President,  Strategic
                                          Planning.  Prior to  joining  the  Company  he worked as a  consultant,  and  served as
                                          Executive  Vice  President of COHR,  Inc.,  from May 1998 to October 1998; and as Chief
                                          Credit Officer with Sirrom Capital  Corporation,  from 1994 to 1997. Mr. Socha became a
                                          director and was appointed Senior Vice President,  Strategic  Planning and Managed Care
                                          in February 2000.

                                     Page 28
<PAGE>

Information Concerning Executive Officers

  Name, Age and Position
  as of March 1, 2000                   Business Experience
  -------------------                   -------------------

  James W. Krause            55         See "Information Concerning Directors"
    Chairman
    and Chief Executive Officer

  Michael J. Boden           52         Mr. Boden joined the Company in June 1995 as Vice President,  Sales and Marketing and was
    Executive Vice President,           named a Senior Vice  President  in February  1998.  He was named  Senior Vice  President,
    Retail Operations                   Leased Retail  Operations  in February,  1999.  From 1992 until  joining the Company,  he
                                        served as Vice  President-- Store  Operations  of This End Up Furniture  Company.  He was
                                        appointed to his current position in February 2000.

  Richard D. Anderson        41         Mr.  Anderson  joined the Company in January  1999 and was named  Senior Vice  President,
    Senior Vice President,              Real Estate in February  1999.  From 1987 until  joining the Company,  he was employed by
    Real Estate                         W.H.  Smith,  PLC where he served as Vice  President,  Real  Estate  and Vice  President,
                                        Development and Construction.

  Eduardo A. Egusquiza       47         Mr.  Egusquiza  joined the  Company in March 1998 as Senior Vice  President,  Information
    Senior Vice President,              Technology.  From 1982 until  joining the Company,  he was  employed by Musicland  Stores
    Information Technology              Corporation, Inc. where he served as Vice President of Information Systems and Services.

  Mitchell Goodman           46         Mr.  Goodman  joined the Company as General  Counsel and Secretary in September  1992 and
    Senior Vice President,              was named a Vice President in November 1993 and Senior Vice President in May 1998.
    General Counsel and Secretary

  Charles M. Johnson         50         Mr.  Johnson joined the Company in October 1997 as Senior Vice  President,  Manufacturing
    Senior Vice President,              and  Distribution.  From  1988  until  joining  the  Company,  he  was  employed  by  the
    Manufacturing and Distribution      Sherwin-Williams  Company, where he served as Vice President and Director of Research and
                                        Development.

  Angus C. Morrison          43         Mr.  Morrison  joined  the  Company  in  February  of 1995 as Vice  President,  Corporate
    Senior Vice President,              Controller.  He  was  appointed  Senior  Vice  President,  Chief  Financial  Officer  and
    Chief Financial Officer             Treasurer in March 1998.  From 1993 until  joining the  Company,  he was  Controller  and
                                        Senior  Financial  Officer  of the  Soap Division  of  The  Dial Corp. He  was Controller
                                        and Senior Financial  Officer  of  the  Food  Division  of  the  same  company  from 1989
                                        through 1992.

  Timothy W. Ranney          47         Mr. Ranney joined the Company in September 1998 and was named Vice  President,  Corporate
    Vice President,                     Controller in October 1998.  From 1991 until joining the Company,  he was employed by CVS
    Corporate Controller                Corporation  where he  served  as Store  Controller  and then as  Director  of  Financial
                                        Systems.

  Peter T. Socha             40         See "Information Concerning Directors"
    Senior Vice President,
    Strategic Planning and
    Managed Care

  Robert W. Stein            44         Mr.  Stein  joined the  Company as Director of Human  Resources  in May 1992.  In January
    Senior Vice President,              1993, he was appointed Vice President,  Human  Resources,  and was appointed  Senior Vice
    Human Resources and                 President in February 1999.  He was appointed to his current position in February 2000.
    Professional Services

  Michael C. Thomas          34         Mr. Thomas joined the Company as Assistant  Vice  President,  Western  Region in October,
    Senior Vice President,              1993.  He was promoted to Senior Vice President, Vista Retail Operations in July of 1999.
    Vista Retail Operations
</TABLE>
                                     Page 29
<PAGE>
            SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section  16(a)  of the  Exchange  Act  requires  our  directors,  executive
officers and holders of more than ten percent (10%) of Common Stock to file with
the Securities and Exchange  Commission initial reports of ownership and reports
of changes in  ownership  of Common  Stock and other  equity  securities  of the
Company.  We believe that,  during 1999, our officers,  directors and holders of
more than ten percent  (10%) of Common  Stock  complied  with all Section  16(a)
filing requirements, except for ITC Service Company, which filed one late report
arising  out of one  purchase  of  shares  of  Common  Stock.  In  making  these
statements, we have relied upon the written representations of our directors and
officers and upon copies of reports furnished to the Company.


ITEM 11.  EXECUTIVE COMPENSATION

     The following table discloses compensation received from the Company by the
Company's  Chief  Executive   Officer,   and  the  Company's  four  most  highly
compensated   officers  other  than  the  Chief  Executive   Officer  (all  such
individuals, collectively, the "named executive officers").

<TABLE>

                                            Summary Compensation Table

                                                                                              Long Term Compensation
                                       Annual Compensation                      ------------------------------------------------
   Name and                         -----------------------------------------    Restricted      Securities
   Principal                Fiscal                              Other Annual       Stock         Underlying        All Other
   Position                  Year   Salary($)     Bonus($)    Compensation($)   Awards($)(1)    Options/SARs(#)  Compensation($)
   --------                -------  ---------     --------    ---------------   ------------    ---------------  ---------------
<S>                         <C>      <C>          <C>         <C>               <C>             <C>              <C>
   James W. Krause          1999     375,000           --              --            --(2)          340,000           20,000
     Chairman of            1998     368,000       101,500             --          79,688           250,000           20,000(3)
     the Board              1997     338,000       247,000             --          72,000            50,000           20,000(3)
     and Chief
     Executive Officer

   Michael J. Boden         1999     200,000            --             --            --(4)           12,000               --
     Executive Vice         1998     193,000        38,000             --          26,563            15,000               --
     President,             1997     185,000       135,000             --          24,000            15,000               --
     Retail Operations

   Eduardo A. Egusquiza    1999      170,000            --        153,000(5)         --(6)           12,000               --
     Senior Vice           1998(7)   139,000        36,000                         26,563            50,000               --
     President,
     Information
     Technology

   Charles M. Johnson      1999      204,000            --             --            --(6)           12,000               --
     Senior Vice           1998      197,000        39,000         37,000(8)       26,563            15,000               --
     President,            1997(9)    41,000        70,000             --              --            75,000               --
     Manufacturing and
     Distribution

   Angus C. Morrison       1999      170,000            --             --           --(10)           12,000               --
     Senior Vice           1998      160,000        31,000             --          28,155            25,000               --
     President, Chief      1997      107,000        49,000             --          14,438            10,000               --
     Financial Officer
     and Treasurer
                                     Page 30
<PAGE>

(1)  Restricted  Stock  Awards  vest  and  restrictions  lapse  after  five-year
     performance  period to the extent and  depending  upon  achievement  by the
     Company  of  return  on  asset  goals  relative  to a  comparison  group of
     companies.  For awards made in 1998,  restricted  shares, to the extent not
     vested  after five years,  vest after ten years of  employment.  Vesting is
     accelerated automatically upon a change of control (as defined).  Dividends
     (if any are declared) will be paid on restricted stock.
(2)  As  of  January  1,  2000,  Mr.  Krause  had   restricted   stock  holdings
     representing 30,000 shares of Common Stock with a value of $30,930.
(3)  The Company has  executed a "split  dollar"  insurance  agreement  with Mr.
     Krause.  The annual premium  (payable by the Company) is $20,000.  The term
     life  portion of this  premium  is $2,500;  the  non-term  life  portion is
     $17,500.
(4)  As of January 1, 2000, Mr. Boden had restricted stock holdings representing
     10,000 shares of Common Stock with a value of $10,310.
(5)  $82,000 represents reimbursement of relocation expenses; $71,000 represents
     tax reimbursement payments on the foregoing.
(6)  As of  January  1, 2000,  this  executive  had  restricted  stock  holdings
     representing 5,000 shares of Common Stock with a value of $5,155.
(7)  Mr. Egusquiza joined the Company in March 1998.
(8)  $34,000 represents reimbursement of relocation expenses;  $3,000 represents
     tax reimbursement payments.
(9)  Mr. Johnson joined the Company in October 1997.
(10) As  of  January  1,  2000,  Mr.  Morrison  had  restricted  stock  holdings
     representing 8,000 shares of Common Stock with a value of $8,248.
</TABLE>


                        OPTION GRANTS IN LAST FISCAL YEAR

     The  following  table  provides  information  on option grants to the named
executive officers by the Company in 1999. The table also shows the hypothetical
gains or "option  spreads" that would exist for the  respective  options.  These
gains are based on assumed rates of annual compound stock price  appreciation of
5% and 10% from the date the options were granted over the full option term.
<TABLE>


                                                                                Potential Realizable
                                                                                  Value at Assumed
                            No. of      % of Total                              Annual Rates of Stock
                          Securities   Options/SARs                              Price Appreciation
                          Underlying    Granted to                             for Option Terms($)(2)
                         Option/SARs   Employees in   Exercise or   Expiration -----------------------
                           Granted    Fiscal Year(1) Base Price($)     Date         5%          10%
                        ------------  -------------- ------------------------- ----------- -----------
<S>                       <C>         <C>            <C>              <C>        <C>        <C>

  James W. Krause          300,000(3)      34.0          5.50         4/03/04    456,000    1,008,000
                            40,000(4)       4.5          5.281        4/22/09    132,760      336,680
  Michael J. Boden          12,000(4)       1.4          5.281        4/22/09     39,828      101,004
  Eduardo A. Egusquiza      12,000(4)       1.4          5.281        4/22/09     39,828      101,004
  Charles M. Johnson        12,000(4)       1.4          5.281        4/22/09     39,828      101,004
  Angus C. Morrison         12,000(4)       1.4          5.281        4/22/09     39,828      101,004

                                     Page 31
<PAGE>
--------------------

(1)  The Company granted options covering 883,060 shares to employees in 1999.
(2)  These amounts represent  assumed rates of appreciation  only. Actual gains,
     if any,  on stock  option  exercises  and  holdings  of  Common  Stock  are
     dependent  on the future  performance  of Common  Stock and  overall  stock
     market conditions.  There can be no assurance that the amounts reflected in
     this table will be achieved.
(3)  Grant under the Company's  Restated Stock Option and Incentive  Award Plan.
     Option vests 50% first  anniversary of grant date and 25% on each of second
     and third anniversaries of grant date, subject to continued employment.
(4)  Grants under the Company's  Restated Stock Option and Incentive Award Plan.
     Options vest 50% on second anniversary of grant date and 25% on each of the
     third  and  fourth   anniversary  of  grant  date,   subject  to  continued
     employment. Expiration date is 10th anniversary of grant date.
</TABLE>

                          FISCAL YEAR END OPTION VALUES

     The following table provides information,  as of January 1, 2000, regarding
the number and value of options held by the named executive officers.


<TABLE>
                           No. of Securities Underlying        Value of Unexercised
                              Unexercised Options at           In-the-Money Options
                                 Fiscal Year End              At Fiscal Year End($)
                          ------------------------------- -------------------------------
                            Exercisable   Unexercisable(1)  Exercisable    Unexercisable
<S>                         <C>           <C>               <C>            <C>

  James W. Krause            112,500          627,500              0               0
  Michael J. Boden            68,750           38,250              0               0
  Eduardo A. Egusquiza             0           62,000              0               0
  Charles M. Johnson          37,500           64,500              0               0
  Angus C. Morrison           47,500           44,500              0               0

</TABLE>
--------------------

(1)  Shares  represented  were not exercisable as of January 1, 2000, and future
     exercisability  is subject to the  executive's  remaining  employed  by the
     Company for up to four years from grant date of options.

Change in Control Arrangements

     The Company has agreements with the named executive  officers which provide
severance  benefits in the event of  termination  of  employment  under  certain
circumstances  following a change in control of the Company  (as  defined).  The
circumstances are:

   - termination  by the  Company,  other than  because  of death or  disability
     commencing prior to a threatened change in control (as defined);

   - for cause (as defined); or

   - by an officer as the result of a voluntary termination (as defined).

                                     Page 32
<PAGE>
     Following any such  termination,  in addition to compensation  and benefits
already  earned,  the officer  will be entitled to receive a lump sum  severance
payment equal to up to three times the officer's annual rate of base salary.

     Cause for termination by the Company is the:

   - commission of any act that constitutes, on the part of the officer,

    (a)  fraud, dishonesty, gross negligence, or willful misconduct and
    (b)  that directly results in material injury to the Company, or

   - officer's material breach of the agreement, or

   - officer's conviction of a felony or crime involving moral turpitude.


     Circumstances  which would  entitle the officer to terminate as a result of
voluntary termination following a change in control include, among other things:

   - the assignment to the officer of any duties inconsistent with the officer's
     title and status in effect  prior to the  change in  control or  threatened
     change in control;

   - a reduction by the Company of the officer's base salary;

   - the  Company's  requiring the officer to be based  anywhere  other than the
     Company's principal executive offices;

   - the failure by the Company,  without the officer's  consent,  to pay to the
     officer any portion of the officer's then current compensation;

   - the failure by the Company to continue in effect any material  compensation
     plan in which the officer  participates  immediately prior to the change in
     control or threatened change in control; or

   - the failure by the Company to continue to provide the officer with benefits
     substantially  similar  to those  enjoyed by the  officer  under any of the
     Company's life insurance, medical, or other plans.

     The term of each  agreement is for a rolling three years unless the Company
gives  notice that it does not wish to extend such term,  in which case the term
of the agreement would expire three years from the date of the notice.

                                     Page 33
<PAGE>
                      REPORT OF THE COMPENSATION COMMITTEE

                                   A. General

     The Compensation  Committee (the Committee)  determines the compensation of
the executive  officers of the Company and also  administers and makes awards of
equity  compensation  under Vista's equity programs.  None of the members of the
Committee is an officer or employee of the Company.

Compensation Philosophy

     The compensation philosophy of the Company is based on the premise that the
Company's achievements result from the coordinated efforts of its employees. The
Company strives to achieve those objectives  through teamwork that is focused on
meeting the expectations of customers and shareholders.

Goals of the Compensation Program

     The goals of the compensation program are to:

   - Link compensation with business objectives and performance

   - Enable the Company to attract,  retain,  and reward executive  officers who
     contribute to the long-term success of the Company.

Components

     The program consists of three components:

   - Salaries.   Salaries  are  based  on  compensation  studies  of  comparable
     positions in the Company's market area and on the Committee's assessment of
     the individual's performance.  Generally, the Company's objective is to set
     executive  salaries at or near the midpoint of the survey range of salaries
     for similar  positions  at other  companies.  Salaries  are  reviewed on an
     annual basis.

   - Annual Incentive  Compensation.  The Company has adopted a plan under which
     the Committee will award annual incentive  compensation only if the Company
     has met certain  financial goals (based on defined  improvement in earnings
     per share) and if the executive meets defined individual performance goals.
     Both conditions must be met; as a result,  if the Company does not meet its
     financial  goals, the Committee will not approve awards of annual incentive
     compensation, even if the executive has met the individual goals.

   - Equity  Compensation.  Each year,  the  Committee  grants stock  options to
     administrative  and field level employees.  In 1999, the Committee approved
     guidelines for annual grants of stock options to the executive  officers of
     the Company. These guidelines contemplate annual grants of 40,000 shares to
     the chief  executive  officer and 12,000 to the  executive  officers of the
     Company.  The Committee  approved these guidelines on the basis of a report
     submitted by independent compensation consultants.

                                     Page 34
<PAGE>
                         B. 1999 Compensation Decisions

     The Company's financial performance in 1999 had a significant impact on the
Committee's actions this year.

   - Salaries.  Because of the  significant  operational  and  financial  issues
     facing the Company in 1999,  the  Committee  did not implement any proposed
     salary  increases.  [Because of raises  awarded  during 1998 (and therefore
     applicable to only a portion of 1998),  the summary  compensation  table on
     page 30 sets forth different salaries for 1998 and 1999.]

   - Annual Incentive Compensation. The Company did not meet its financial goals
     for  1999.  As a  result,  the  Committee  did not  approve  any  awards of
     incentive compensation.

   - Equity  Compensation.  In May 1999, the Committee approved annual grants of
     stock  options to  executive  officers in the amounts  contemplated  by the
     guidelines  described above. In October,  the Committee approved a grant of
     an option  covering  100,000  shares to Mr. Socha in  consideration  of Mr.
     Socha's  prior  experience  as well as the  position  and  duties  he would
     assume.  In addition,  in 1999 the Committee  approved grants of options to
     three  executive  officers  (including Mr. Krause) to replace stock options
     which had expired. The earlier grants had been for five-year terms. Because
     the Company has changed its policies to provide for options  with  ten-year
     terms, the Committee  awarded the replacement  options with five-year terms
     (at the same exercise price as in the original stock options).

                            C. Internal Revenue Code

     Section  162(m) of the  Internal  Revenue  Code  limits to $1  million  the
deductibility of compensation paid to the Company's five most highly compensated
officers, unless the Company meets certain requirements. One requirement is that
the Committee  consist entirely of outside  directors.  The Committee meets this
requirement.  Because the stock  option plan of the Company was  approved by our
shareholders, grants of stock options under the Company's stock option plan meet
the requirement that such awards be approved by the  shareholders.  With respect
to salary  compensation  under Section 162(m), the Committee has not adopted any
policies  because total salary  compensation  of each executive  officer is well
below $1 million.


                                                COMPENSATION COMMITTEE


                                                David I. Fuente (Chairman)
                                                Ronald J. Green
                                                James E. Kanaley



                                     Page 35
<PAGE>

                                PERFORMANCE GRAPH

     NOTE:  The  stock  price  performance  shown  on  the  graph  below  is not
necessarily indicative of future price performance.

    [PERFORMANCE GRAPH WHICH APPEARS HERE IS REPRESENTED BY THE TABLE BELOW.]

<TABLE>

                             CUMULATIVE TOTAL RETURN
          Based upon an initial investment of $100 on December 31, 1994
                            with dividends reinvested

<CAPTION>
                       31-Dec-94   30-Dec-95    28-Dec-96    3-Jan-98    2-Jan-99   1-Jan-00
                       ---------   ---------    ---------    --------    --------   --------
<S>                       <C>          <C>          <C>         <C>         <C>        <C>
Vista Eyecare, Inc.       $100         $80          $110        $160        $143       $28
Nasdaq Composite Index    $100         $141         $174        $213        $300       $542
Nasdaq Retail Group       $100         $110         $131        $154        $188       $182


SOURCE:  GEORGESON SHAREHOLDER COMMUNICATIONS INC.
</TABLE>
















                                     Page 36
<PAGE>
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

                        COMMON STOCK OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

     The  Company is not aware of any  person  who,  on March 1,  2000,  was the
beneficial  owner of five percent (5%) or more of  outstanding  shares of Common
Stock, except as set forth below.

                                            Amount and Nature of     Percent
                                            Beneficial Ownership    of Class
                                            --------------------    --------

               Campbell B. Lanier, III           4,361,187(a)(b)      20.6
               Rayna Casey                       1,808,152(c)          8.5
----------

(a)  Includes shares owned by the following individuals and entities, who may be
     deemed a "group" within the meaning of the beneficial  ownership provisions
     of the federal  securities laws: Mr. Lanier (836,957 shares);  Mr. Lanier's
     wife (750  shares);  Campbell B. Lanier,  IV (25,550  shares);  ITC Service
     Company (3,356,648 shares);  William H. Scott, III (82,782 shares);  Martha
     J. Scott  (28,000  shares,  inclusive  of 10,000  shares owned by the Scott
     Trust,  of which Ms.  Scott is the sole  trustee);  William H.  Scott,  III
     Irrevocable  Trust F/B/O Martha Scott (the "Scott Trust") (10,000  shares);
     Bryan W. Adams (8,000 shares).
(b)  Includes  22,500 shares which Mr. Lanier has the right to acquire under the
     Company's Non-Employee Director Stock Option Plan.
(c)  Includes  159,948 shares owned by a trust of which Ms. Casey is the trustee
     and her daughter the  beneficiary.  Ms.  Casey's  address is 712 West Paces
     Ferry Road, Atlanta,  Georgia.

     The following table sets forth information, as of March 1, 2000, concerning
beneficial  ownership by all directors  and  nominees,  by each of the executive
officers named in the Summary Compensation Table below, and by all directors and
executive officers as a group.  Percent of Number of Shares Outstanding Name and
Address of Beneficial Owner(1) Beneficially Owned Common Stock

    Campbell B. Lanier, III.................        4,361,187(2)(3)      20.6
    James W. Krause.........................          494,444(4)          2.3
    J. Smith Lanier, II.....................          302,235(3)(5)       1.4
    Ronald J. Green.........................          111,500(3)(6)        *
    Peter T. Socha..........................          100,000(7)           *
    David I. Fuente.........................           50,500(3)           *
    James E. Kanaley........................                0              *
    Michael J. Boden........................           96,827(8)           *
    Angus C. Morrison.......................           59,500(9)           *
    Charles M. Johnson......................           58,350(10)          *
    Eduardo A. Egusquiza....................           30,000(11)          *
    All directors and executive officers as a
    group (sixteen persons).................        5,832,753            26.6

                                     Page 37
<PAGE>
--------------------

*    Represents less than one percent of the outstanding Common Stock.
(1)  Unless  otherwise  indicated below, the address of the persons named is 296
     Grayson Highway, Lawrenceville, GA 30045.
(2)  See footnote (a) in table above.
(3)  Includes 22,500 shares which this individual has the right to acquire under
     the Company's Non-Employee Director Stock Option Plan.
(4)  Includes 262,500 shares which Mr. Krause has the right to acquire under the
     Company's Restated Stock Option and Incentive Award Plan (the "Plan"). Also
     includes 30,000 shares of restricted stock awarded under the Plan.
(5)  Includes 1,800 shares owned by Mr.  Lanier's wife, as to which he disclaims
     beneficial ownership.
(6)  Includes  9,000  shares  owned  by Mr.  Green's  children,  as to  which he
     disclaims beneficial ownership.
(7)  Represents  100,000  shares which Mr. Socha has the right to acquire  under
     the Plan.
(8)  Includes  83,750  shares which Mr. Boden has the right to acquire under the
     Plan.  Also includes  10,000  shares of restricted  stock awarded under the
     Plan.
(9)  Includes  11,200  shares held as  custodian  for Mr.  Morrison's  children,
     22,500  shares which Mr.  Morrison has the right to acquire under the Plan,
     and 8,000 shares of restricted stock awarded under the Plan.
(10) Includes 45,000 shares which Mr. Johnson has the right to acquire under the
     Plan and 5,000 shares of restricted stock awarded under the Plan.
(11) Includes  25,000 shares which Mr.  Egusquiza has the right to acquire under
     the Plan and 5,000 shares of restricted stock awarded under the Plan.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company paid insurance  premiums of approximately  $1.5 million in 1999
for insurance policies purchased through an agency in which J. Smith Lanier, II,
a director of the  Company,  has a  substantial  ownership  interest.  The Audit
Committee (which has ratified the purchase of insurance by the Company from this
insurance  agency) and management of the Company believe that these premiums are
comparable to those which could have been obtained from unaffiliated companies.


                                     Page 38
<PAGE>

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a) (1) and (2) The Consolidated  Financial  Statements and Schedule of the
Company  and its  subsidiaries  are filed as a separate  section of this  Report
commencing on page F-1.

     (3) We have filed or incorporated by reference the following exhibits:

Exhibit
Number     Description
-------    -----------

3.1    -- Amended and Restated  Articles of  Incorporation of the Company, dated
          April 8, 1992,  along with  Articles of  Amendment  to the Amended and
          Restated  Articles of  Incorporation  of the Company dated January 17,
          1997,  and Articles of Amendment to the Amended and Restated  Articles
          of Incorporation of the Company dated December 31, 1998,  incorporated
          by reference to the  Company's  Form 8-K filed with the  Commission on
          January 6, 1999.

3.2    -- Amended and Restated By-Laws of the Company, incorporated by reference
          to the  Company's  Registration  Statement  on Form S-1,  registration
          number  33-46645,  filed with the  Commission  on March 25, 1992,  and
          amendments thereto.

4.1    -- Form of Common  Stock  Certificate, incorporated  by  reference to the
          Company's Registration Statement on Form 8-A filed with the Commission
          on January 17, 1997.

4.2    -- Rights  Agreement  dated  as  of  January 17, 1997 between the Company
          and Wachovia Bank of North Carolina,  N.A.,  incorporated by reference
          to the  Company's  Registration  Statement  on Form 8-A filed with the
          Commission on January 17, 1997.

4.3    -- Indenture  dated as of October 8, 1998, among the Company, the Guaran-
          tors and State Street Bank & Company,  as Trustee  (including  form of
          Exchange   Note),   incorporated   by  reference   to  the   Company's
          Registration  Statement on Form S-4,  registration  number  333-71825,
          filed with the Commission on February 5, 1998, and amendments thereto.

4.4    -- Purchase Agreement dated as of October 8, 1998, among the Company, the
          Guarantors and the Initial  Purchasers,  incorporated  by reference to
          the Company's  Registration Statement on Form S-4, registration number
          333-71825,  filed  with  the  Commission  on  February  5,  1998,  and
          amendments thereto.

4.5    -- Registration Rights Agreement  dated as of October 8, 1998,  among the
          Company,  the Guarantors and the Initial  Purchasers,  incorporated by
          reference  to  the  Company's  Registration  Statement  on  Form  S-4,
          registration  number 333- 71825, filed with the Commission on February
          5, 1998, and amendments thereto.

                                     Page 39
<PAGE>
10.1   -- Sublease  Agreement, dated  December 16, 1991, by and between Wal-Mart
          Stores,  Inc.  and  the  Company,  incorporated  by  reference  to the
          Company's  Registration  Statement  on Form S-1,  registration  number
          33-46645,  filed with the Commission on March 25, 1992, and amendments
          thereto.

10.2   -- Form  indemnification  agreement  for directors and executive officers
          of the Company,  incorporated  by reference to the Company's Form 10-K
          for the fiscal year ended December 31, 1992.

10.3   -- Vision Center Master License Agreement,  dated as of June 16, 1994, by
          and between  Wal-Mart  Stores,  Inc. and the Company,  incorporated by
          reference to the Company's  Form 10-Q for the  quarterly  period ended
          September  30,  1994.  [Portions  of  Exhibit  10.3 have been  omitted
          pursuant  to an  order  for  confidential  treatment  granted  by  the
          Commission.  The omitted  portions have been filed separately with the
          Commission.]

10.4++ -- Split  Dollar  Life  Insurance  Agreement,  dated  as  of  November 3,
          1994, among the Company, A. Kimbrough Davis, as Trustee,  and James W.
          Krause,  incorporated  by reference to the Company's Form 10-K for the
          fiscal year ended December 31, 1994.

10.5++ -- Level  IV  Management  Incentive  Plan,  incorporated  by reference to
          the Company's Form 10-K for the fiscal year ended December 31, 1994.

10.6   -- Agreement dated as of November 23, 1995 by and between Mexican  Vision
          Associates Operadora,  S. de R.L. de C.V. and Wal-Mart de Mexico, S.A.
          de C.V. in original  Spanish and an uncertified  English  translation,
          incorporated  by reference to the  Company's  Form 10-K for the fiscal
          year ended  December  30,  1995.  [Portions  of Exhibit 10.6 have been
          omitted  pursuant to a request for  confidential  treatment filed with
          the Commission.  The omitted  portions have been filed separately with
          the Commission.]

10.7++ -- Executive   Relocation  Policy,   incorporated   by   reference to the
          Company's Form 10-Q for the quarterly period ended March 30, 1996.

10.8++ -- Restated  Stock  Option  and  Incentive  Award Plan,  incorporated  by
          reference to the Company's  Form 10-Q for the  quarterly  period ended
          June 29, 1996.

10.9++ -- First  Amendment  to  Restated  Stock Option and Incentive Award Plan,
          incorporated by reference to the Company's Form 10-Q for the quarterly
          period ended March 29, 1997.

10.10++-- Form  Change  in  Control  Agreement  for  executive  officers  of the
          Company,  incorporated by reference to the Company's Form 10-K for the
          fiscal year ended December 28, 1996.

                                     Page 40
<PAGE>
10.11++-- Form  Restricted  Stock  Award,   incorporated  by  reference  to  the
          Company's Form 10-Q for the quarterly period ended March 29, 1997.

10.12++-- Restated  Non-Employee  Director  Stock Option Plan,  incorporated  by
          reference to the Company's Form 10-Q filed on June 28, 1997.

10.13++-- Executive Deferred Compensation Plan, incorporated by reference to the
          Company's Form 10-K for the fiscal year ended January 3, 1998.

10.14  -- Credit  Agreement  dated  October  8, 1998  by  and among the Company,
          Bank of America,  FSB,  First Union  National  Bank and the  financial
          institutions listed hereto, incorporated by reference to the Company's
          Registration  Statement on Form S-4,  registration  number  333-71825,
          filed with the Commission on February 5, 1999, and amendments thereto.

10.15**-- Amended and Restated Credit Agreement dated as of November 12, 1999 by
          and between the Company and Foothill Capital Corporation.

10.16**-- Agreement dated as of September 9, 1999, by and among the Company, ITC
          Service Company, and Campbell B. Lanier, III.

21**   -- Subsidiaries of the Registrant.

23**   -- Consent by Arthur Andersen LLP.

27**   -- Financial Data Schedule.

** Filed with this Form 10-K.

++   Management contract or compensatory plan or arrangement in which a director
     or named executive officer participates.

   (b)  The  following  reports  on Form 8-K have  been  filed  during  the last
        quarter of the period covered by this report:.

         Date of Report     Item Reported      Financial Statements Filed
         --------------     -------------      --------------------------
         October 19, 1999   Item 5             None



                                     Page 41
<PAGE>

                    VISTA EYECARE, INC. AND SUBSIDIARIES


            CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
     AS OF JANUARY 1, 2000, JANUARY 2, 1999 AND JANUARY 3, 1998
                             TOGETHER WITH
                           AUDITORS' REPORT


         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

   The  following   consolidated   financial  statements  and  schedule  of  the
registrant and its subsidiaries are submitted herewith in response to Item 8 and
Item 14(a)1 and to Item 14(a)2, respectively.

                                                                  Page
                                                                  ----

Report of Independent Public Accountants                           F-2

Consolidated Balance Sheets as of January 1, 2000 and
  January 2, 1999                                                  F-3

Consolidated Statements of Operations for the
  Years Ended  January 1, 2000, January 2, 1999 and
  January 3, 1998                                                  F-5

Consolidated  Statements of Shareholders'  Equity for the
  Years Ended January 1, 2000, January 2, 1999 and
  January 3, 1998                                                  F-6

Consolidated  Statements  of Cash  Flows for the
  Years  Ended  January  1, 2000, January 2, 1999 and
  January 3, 1998                                                  F-7

Notes to Consolidated Financial Statements and Schedule            F-8

Schedule II, Valuation and Qualifying Accounts                     F-36

   All other schedules for which provision is made in the applicable  accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions,  are inapplicable,  or have been disclosed in the notes to
consolidated financial statements and, therefore, have been omitted.

                                  F-1

<PAGE>
               REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Vista Eyecare, Inc.
and Subsidiaries:

     We have  audited  the  accompanying  consolidated  balance  sheets of VISTA
EYECARE, INC. (a Georgia corporation) AND SUBSIDIARIES as of January 1, 2000 and
January  2,  1999  and  the  related  consolidated   statements  of  operations,
shareholders'  equity,  and cash flows for each of the three years in the period
ended January 1, 2000. These financial  statements and the schedule  referred to
below are the responsibility of the Company's management.  Our responsibility is
to express an opinion on these  financial  statements  and schedule based on our
audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial  position of Vista  Eyecare,  Inc. and
subsidiaries  as of January 1, 2000 and January 2, 1999 and the results of their
operations  and their cash flows for each of the three years in the period ended
January 1, 2000 in conformity with accounting  principles  generally accepted in
the United States.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial  statements,  the  Company  incurred  a net loss in 1999 and has a net
working capital deficiency of approximately $11.7 million at January 1, 2000. In
addition,   the  Company  filed  voluntary  petitions  with  the  United  States
Bankruptcy  Court for  reorganization  under  Chapter 11.  These  matters  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in  regard to these  matters  are  described  in Note 3. The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification  of asset carrying amounts or the amount and
classification  of liabilities that might result should the Company be unable to
continue as a going concern.

     Our  audits  were made for the  purpose  of forming an opinion on the basic
financial  statements  taken as a whole.  The  schedule  listed  in the index to
consolidated  financial  statements is presented for purposes of complying  with
the  Securities  and  Exchange  Commission's  rules and is not part of the basic
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures  applied in the audit of the basic  financial  statements and, in our
opinion,  fairly states in all material  respects the financial data required to
be set forth therein in relation to the basic  financial  statements  taken as a
whole.


ARTHUR ANDERSEN LLP

Atlanta, Georgia
March 17, 2000
(except for the matter
discussed in Note 3,
as to which the date
is April 5, 2000)
                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                                     VISTA EYECARE, INC. AND SUBSIDIARIES

                                          CONSOLIDATED BALANCE SHEETS
                                      January 1, 2000 and January 2, 1999
                                    (In thousands except share information)

                                                                                        1999           1998
                                                                                    -----------    -----------
 <S>                                                                                 <C>          <C>
                                                    ASSETS
 CURRENT ASSETS:
   Cash and cash equivalents                                                           $   2,886    $   7,072
   Accounts receivable (net of allowance: 1999 - $4,403; 1998 - $1,516)                   10,416       10,135
   Inventories                                                                            34,373       31,670
   Other current assets                                                                    2,761        2,899
                                                                                       ----------   ----------
      Total current assets                                                                50,436       51,776
                                                                                       ----------   ----------
 PROPERTY AND EQUIPMENT:
   Equipment                                                                              57,750       54,396
   Furniture and fixtures                                                                 26,600       23,124
   Leasehold improvements                                                                 28,458       26,806
   Construction in progress                                                                3,427        2,022
                                                                                       ----------   ----------
                                                                                         116,235      106,348
   Less accumulated depreciation                                                         (62,329)     (48,305)
                                                                                       ----------   ----------
   Net property and equipment                                                             53,906       58,043


 OTHER ASSETS AND DEFERRED COSTS
   (net of accumulated amortization:  1999 - $1,500; 1998 - $1,292)                        9,315        9,953
 DEFERRED INCOME TAX ASSET                                                                   385          385
 GOODWILL AND OTHER INTANGIBLE ASSETS
   (net of accumulated amortization: 1999 - $6,994; 1998 - $2,544)                       106,177      108,940
                                                                                       ----------   ----------
                                                                                       $ 220,219    $ 229,097
                                                                                       ==========   ==========
</TABLE>



                                                     F-3
<PAGE>

<TABLE>
<CAPTION>
                                                                                          1999        1998
                                                                                      ----------   ----------
 <S>                                                                                   <C>           <C>
                                     LIABILITIES AND SHAREHOLDERS' EQUITY
 CURRENT LIABILITIES:
   Accounts payable                                                                    $  17,192   $  18,925
   Accrued expenses and other current liabilities                                         24,568      26,637
   Current portion other long-term debt and capital lease obligations                      1,098       2,006
   Revolving credit facility and term loan                                                19,292          --
                                                                                       ---------   ---------
      Total current liabilities                                                           62,150      47,568
                                                                                       ---------   ---------
 SENIOR NOTES (net of discount:  1999 - $1,253; 1998 - $1,391)                           123,747     123,609

 REVOLVING CREDIT FACILITY                                                                    --       6,000
 OTHER LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS                                        6,865       7,223


 COMMITMENTS AND CONTINGENCIES (Note 11)
 REDEEMABLE COMMON STOCK                                                                      900        770

 SHAREHOLDERS' EQUITY:
    Preferred stock, $1 par value; 5,000,000 shares authorized, none issued                   --          --
    Common stock, $0.01 par value, 100,000,000 shares authorized, 21,179,103
    and 21,166,612 shares issued and outstanding as of January 1, 2000 and
    January 2, 1999, respectively                                                            211         211
    Additional paid-in capital                                                            47,387      47,195
    Retained (deficit)earnings                                                           (16,968)        594
    Accumulated other comprehensive income                                                (4,073)     (4,073)
                                                                                       ---------   ---------
         Total shareholders' equity                                                       26,557      43,927
                                                                                       ---------   ---------
                                                                                       $ 220,219   $ 229,097
                                                                                       =========   =========



      The  accompanying  notes  are  an  integral  part  of  these  consolidated
financial statements.
</TABLE>


                                                     F-4
<PAGE><TABLE>
<CAPTION>

                                                    VISTA EYECARE, INC. AND SUBSIDIARIES

                                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 For the years ended January 1, 2000, January 2, 1999, and January 3, 1998
                                                 (In thousands except per share information)

                                                                                   For the years ended
                                                                        ---------------------------------------
                                                                        January 1,     January 2,    January 3,
                                                                          2000           1999          1998
                                                                        ----------    ----------     ----------
 <S>                                                                     <S>           <C>            <C>
 NET SALES                                                               $  329,055    $  245,331     $  186,354
 COST OF GOODS SOLD                                                         147,768       112,929         86,363
                                                                         ----------    ----------     ----------
 GROSS PROFIT                                                               181,287       132,402         99,991

 SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE                               177,162       121,413         89,156
 IMPAIRMENT LOSS ON LONG-LIVED ASSETS                                         1,952            --             --
                                                                         ----------    -----------    ----------
 OPERATING INCOME                                                             2,173        10,989         10,835
 INTEREST EXPENSE, NET                                                       19,329         5,538          1,554
                                                                         ----------    ----------     ----------
 INCOME/(LOSS) BEFORE INCOME TAXES                                          (17,156)        5,451          9,281
 INCOME TAX EXPENSE                                                              --         2,037          3,708
                                                                         ----------    ----------     ----------
 NET INCOME/(LOSS) BEFORE EXTRAORDINARY ITEM                             $  (17,156)   $    3,414     $    5,573
 EXTRAORDINARY LOSS, NET OF TAXES                                              (406)           --             --
                                                                         ----------    ----------     ----------
 NET INCOME/(LOSS)                                                       $  (17,562)   $    3,414     $    5,573
                                                                         ==========    ==========     ==========

 BASIC EARNINGS/(LOSS) PER SHARE:
  EARNINGS/(LOSS) BEFORE EXTRAORDINARY ITEM                              $   (0.81)    $     0.16     $    0.27
  EXTRAORDINARY LOSS                                                         (0.02)            --            --
                                                                         ----------    ----------     ----------
  NET EARNINGS/(LOSS)PER BASIC SHARE                                     $   (0.83)    $     0.16     $    0.27
                                                                         ==========    ==========     ==========

 DILUTED EARNINGS/(LOSS) PER SHARE:
  EARNINGS/(LOSS) BEFORE EXTRAORDINARY ITEM                              $   (0.81)    $     0.16     $    0.27
  EXTRAORDINARY LOSS                                                         (0.02)            --            --
                                                                         ----------    ----------     ----------
  NET EARNINGS/(LOSS)PER DILUTED SHARE                                   $   (0.83)    $     0.16     $    0.27
                                                                         ==========    ==========     ==========

          The  accompanying  notes are an  integral  part of these  consolidated
financial statements.
</TABLE>


                                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                                     VISTA EYECARE, INC. AND SUBSIDIARIES

                                CONSOLIDATED  STATEMENTS OF SHAREHOLDERS' EQUITY
                      For the years ended January 1, 2000, January 2, 1999, and January 3, 1998
                                    (In thousands except share information)

                                                                                       Accumulated
                                         Common Stock       Additional   Retained         Other
                                     ----------------------   Paid-In    Earnings     Comprehensive
                                     Shares          Amount   Capital    (Deficit)        Income       Total
                                     ------          ------ ----------   ---------     -----------   --------
 <S>                                <C>              <C>     <C>         <C>           <C>           <C>
 BALANCE, December 28, 1996         20,644,752       $  206 $ 42,166     $  (8,393)    $  (4,073)   $  29,906
 Issuance of common stock              110,795                    66                                       66
 Awards of restricted stock             54,000            1       35                                       36
 Exercise of stock options              10,408                    17                                       17
 Net income                                                                  5,573                      5,573
                                    ----------       ------ --------     ---------     ---------     --------
 BALANCE, January 3, 1998           20,819,955          207   42,284        (2,820)       (4,073)      35,598
 Awards of restricted stock             52,000            1      121                                      122
 Exercise of stock options             294,657            3    1,482                                    1,485
 Tax settlement (see Note 11)                                  3,308                                    3,308
 Net income                                                                  3,414                      3,414
                                    ----------       ------ --------     ---------     ---------     --------
 BALANCE, January 2, 1999           21,166,612          211   47,195           594        (4,073)      43,927
 Restricted stock                                                136                                      136
 Exercise of stock options              12,491                    56                                       56
 Net loss                                                                  (17,562)                   (17,562)
                                    ----------       ------ --------     ---------     ---------     --------
 BALANCE, January 1, 2000           21,179,103       $  211 $ 47,387     $ (16,968)    $  (4,073)    $ 26,557
                                    ==========       ====== ========     =========     =========     ========

     The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>






                                                     F-6
<PAGE>
<TABLE>
<CAPTION>
                                     VISTA EYECARE, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     For the Years Ended January 1, 2000, January 2, 1999,  and January 3, 1998
                                                 (In thousands)

                                                                    1999            1998            1997
                                                                    ----            ----            ----
<S>                                                              <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)                                                $(17,562)       $  3,414        $  5,573
Adjustments to reconcile net income to
   net cash provided by (used in) operating activities:
     Depreciation and amortization                                 18,602          14,177          11,035
     Provision for deferred income tax expense                         --           1,173           1,441
     Impairment of long-lived assets                                1,952              --              --
     Extraordinary loss                                               406              --              --
     Other                                                           (459)            936             319
     Changes in operating assets and liabilities, net of
       effects of acquisitions:
        Receivables                                                  (281)         (1,504)           (875)
        Inventories                                                (2,703)          1,304           2,031
        Store preopening costs                                         --              --            (643)
        Other current assets                                          138          (1,630)            612
        Accounts payable                                           (1,733)           (410)         (1,872)
        Accrued expenses                                           (2,069)         (7,691)          3,117
                                                                 --------        --------        --------
            Total adjustments                                      13,853           6,355          15,165
                                                                 --------        --------        --------
            Net cash (used in) provided by operating activities    (3,709)          9,769          20,738
                                                                 --------        --------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                (12,704)         (9,183)         (8,049)
Acquisitions, net of cash acquired                                     --         (97,357)         (1,772)
Proceeds from sale of property and equipment                          955              --              --
Payment for non-competition agreement                                  --              --            (484)
Purchase of assignment agreement                                       --              --            (500)
                                                                 --------        --------        --------
            Net cash used in investing activities                 (11,749)       (106,540)        (10,805)
                                                                 --------        --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of senior notes, net of discount                    --         123,580              --
Advances on revolving credit facility                              79,238          52,500           5,500
Repayments on revolving credit facility                           (65,946)        (66,000)        (12,500)
Principal payment on notes payable and capital leases              (1,265)           (436)         (1,450)
Proceeds from exercise of stock options                                56           1,485              17
Deferred financing costs                                             (811)         (9,845)            (51)
                                                                 --------        --------        --------
            Net cash provided by (used in) financing activities    11,272         101,284          (8,484)
                                                                 --------        --------        --------
NET INCREASE (DECREASE) IN CASH                                    (4,186)          4,513           1,449
CASH, beginning of year                                             7,072           2,559           1,110
                                                                 --------        --------        --------
CASH, end of year                                                $  2,886        $  7,072        $  2,559
                                                                 ========        ========        ========

            The  accompanying  notes are an integral part of these  consolidated
financial statements.
</TABLE>                             F-7
<PAGE>

                   VISTA EYECARE, INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE


1.  ORGANIZATION AND OPERATIONS

     Vista Eyecare,  Inc.,  formerly  National  Vision  Associates,  Ltd.,  (the
"Company")  is engaged in the retail  sale of optical  goods and  services.  The
Company is largely dependent on Wal-Mart Stores, Inc. ("Wal-Mart") for continued
operation  of  vision  centers  which  generate  a  significant  portion  of the
Company's  revenues  (See Note 5). In October  1997,  the Company  acquired  the
capital  stock of  Midwest  Vision,  Inc.,  a  retail  optical  company  with 51
locations in Minnesota and three  adjoining  states.  In July 1998,  the Company
acquired  the  capital  stock of  Frame-n-Lens  Optical,  Inc.,  which  operated
approximately  280 vision  centers,  mainly in the  western  United  States.  In
October 1998, the Company acquired the capital stock of New West Eyeworks,  Inc.
which operated approximately 175 vision centers in 13 states (See Note 6).

2.  SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and its  subsidiaries.  All significant  intercompany  balances and transactions
have been  eliminated  in  consolidation.  The Company  operates on a 52/53 week
retail calendar with the fiscal year ending on the Saturday  closest to December
31. Pursuant to such calendar,  financial  information for each of 1998 and 1996
is  presented  for  the  52-week   period  ended  January  2  and  December  28,
respectively.  Fiscal 1997  consisted of 53 weeks ended January 3, 1998.  Due to
various statutory and other  considerations,  international  operations were not
changed to this 52/53 week calendar.  To allow for more timely consolidation and
reporting,  international  operations  are  reported  using a fiscal year ending
November 30.

     Certain  amounts in the  January 2, 1999 and  January 3, 1998  consolidated
financial  statements  have been  reclassified to conform to the January 1, 2000
presentation.

Revenue Recognition

     The Company  recognizes  revenues  and the related  costs from retail sales
when at least 50% of the payment has been received.

     In  December  1999,  the SEC issued  Staff  Accounting  Bulletin  No.  101,
"Revenue Recognition in Financial Statements." SAB 101 summarizes the SEC's view
in  applying  generally  accepted  accounting  principles  to  selected  revenue
recognition  issues. The Company is required to apply the guidance in SAB 101 to
the financial  statements no later than the second  quarter of 2000. The Company
is currently  reviewing the  requirements of SAB 101 and assessing its impact on
the consolidated  financial  statements.  The Company anticipates  reporting the
impact in the second  quarter of 2000 as a cumulative  effect  adjustment to the
consolidated   financial  statements  resulting  from  a  change  in  accounting
principles.

                                       F-8
<PAGE>

Cash and Cash Equivalents

     The Company considers cash on hand, short-term cash investments, and checks
that  have not been  processed  by  financial  institutions  to be cash and cash
equivalents. The aggregate amount of outstanding checks not processed at January
1, 2000 was $556,000 (at January 2, 1999 - $816,000). The Company's policy is to
maintain uninvested cash at minimal levels. Cash includes cash equivalents which
represent  highly liquid  investments  with a maturity of one month or less. The
carrying amount  approximates  fair value. The Company  restricts  investment of
temporary cash investments to financial institutions with high credit standings.

Inventories

     Inventories  are valued at the lower of  weighted  average  cost or market.
Market represents the net realizable value.


Store Preopening Costs

     Prior to 1998,  preopening  costs which were directly  associated  with the
opening of new vision  centers have been  capitalized  and  amortized  using the
straight-line  method over 12 months  beginning  with the  commencement  of each
vision  center's  operations.  The average cost  capitalized  per vision  center
approximated  $20,000.  Effective  in 1998,  preopening  costs are  expensed  as
incurred in accordance with AICPA Statement of Position 98-5,  "Reporting on the
Costs of Start-Up Activities."

Property and Equipment

     Property  and  equipment  are  stated  at  cost.  For  financial  reporting
purposes,  depreciation  is  computed  using the  straight-line  method over the
assets'  estimated  useful  lives or terms of the related  leases,  whichever is
shorter.  Accelerated  depreciation  methods  are used for income tax  reporting
purposes.   For  financial  reporting  purposes,   the  useful  lives  used  for
computation of  depreciation  range from five to ten years for  equipment,  from
three to nine  years for  furniture  and  fixtures,  from three to six years for
hardware and software related to information systems  processing,  and from five
to  nine  years  which  approximate  the  remaining  lease  term  for  leasehold
improvements.  At the time  property and  equipment  are  retired,  the cost and
related  accumulated  depreciation are removed from the accounts and any gain or
loss is credited or charged to income.  Periodically,  the Company evaluates the
net book value of property and  equipment  for  impairment.  This  evaluation is
performed for retail locations and compares management's best estimate of future
cash flows with the net book value of the property and equipment. See Note 4 for
a discussion of impaired property and equipment in 1999. Maintenance and repairs
are  charged  to  expense  as  incurred.   Replacements   and  improvements  are
capitalized.

                                       F-9
<PAGE>
Balance Sheet Financial Instruments:  Fair Values

     The carrying amount reported in the  consolidated  balance sheets for cash,
accounts  receivable,  accounts  payable and short-term debt  approximates  fair
value  because  of the  immediate  or  short-term  maturity  of these  financial
instruments.  The carrying  amount  reported  for  "Revolving  Credit  Facility-
Long-Term"  approximates  fair value  because  the  underlying  instrument  is a
variable  rate note that  reprices  frequently.  The fair value of the Company's
previous  fixed  interest rate swap  agreements and fixed rate debt was based on
estimates  using standard  pricing models that take into  consideration  current
interest rate market conditions supplied by independent financial institutions.

     Financial   instruments   which   potentially   subject   the   Company  to
concentrations of credit risk consist principally of trade accounts  receivable.
The  risk is  limited  due to the  large  number  of  individuals  and  entities
comprising the Company's customer base.

Goodwill and other Intangible Assets

     Goodwill and other  intangible  assets  represent the excess of the cost of
net assets acquired in certain contract  transactions and business  acquisitions
over their fair value.  Such amounts are amortized over periods  ranging from 11
years to 30 years.  The Company  periodically  evaluates  the carrying  value of
goodwill and other intangible  assets based on the expected future  undiscounted
operating cash flows of the related business unit.

Income Taxes

     Deferred  income  taxes are  recorded  using  current  enacted tax laws and
rates.  Deferred  income taxes are provided for  depreciation,  inventory  basis
differences,  and accrued  expenses  where there is a  temporary  difference  in
recording such items for financial reporting and income tax reporting purposes.

Other Deferred Costs

     Other deferred costs include  capitalized  financing  costs which are being
amortized  on a straight  line basis over  periods  from three to seven years to
correspond  with  the  terms  of  the  underlying  debt.  In  addition,  certain
capitalized  assets resulting from contractual  obligations are included and are
being amortized on a straight line basis over periods of up to five years.

Advertising and Promotion Expense

     Production  costs  of  future  media   advertising  and  related  promotion
campaigns are deferred until the advertising events occur. All other advertising
and  promotion  costs are expensed over the course of the year in which they are
incurred.

Interest Expense, Net

     Interest expense includes  interest on debt and capital lease  obligations,
purchase  discounts on invoice  payments,  the  amortization of finance fees, as
well as hedge and swap  agreements,  and the amortization of the discount on the
senior notes.

                                      F-10
<PAGE>
Foreign Currency Translation

     The financial  statements of foreign  subsidiaries are translated into U.S.
dollars in accordance  with Statement of Financial  Accounting  Standards No. 52
("SFAS No.  52").  Translation  adjustments,  which  result  from the process of
translating foreign financial statements into U.S. dollars, are accumulated as a
separate component of other comprehensive income.

Other Comprehensive Income

     In July 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting Standards No. 130 ("SFAS 130"),  "Reporting  Comprehensive
Income." The statement  addresses the reporting and display of changes in equity
that result from transactions and other economic events,  excluding transactions
with owners.  The adoption of SFAS No. 130 did not have a material impact on the
Company's financial statements,  as comprehensive income was equal to net income
in 1999, 1998 and 1997.

Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

3.   SUBSEQUENT EVENTS AND GOING CONCERN MATTERS

Proceedings Under Chapter 11 of the Bankruptcy Code

     On April 5, 2000,  the Company and ten of its  subsidiaries  (collectively,
the "Debtors") filed voluntary petitions with the United States Bankruptcy Court
for the Northern  District of Georiga for  reorganization  under Chapter 11 (the
"Chapter 11 Cases"). The Chapter 11 Cases have been consolidated for the purpose
of joint  administration  under Case No.  00-65214.  The Debtors  are  currently
operating their businesses as  debtors-in-possession  pursuant to the Bankruptcy
Code.  All  affiliated  entities of the  Company are  included in the Chapter 11
Cases,  except  only (a) three  subsidiaries  which are  licensed  managed  care
organizations and (b) foreign subsidiaries of the Company.

     The Debtors expect to file a reorganization  plan or plans that provide for
emergence  from  bankruptcy  in 2000 or 2001.  Management  anticipates  that its
reorganization plan will include closing additional  under-performing stores and
restructuring  the Company's  debt and equity.  There can be no assurance that a
reorganization plan or plans will be proposed by the Debtors or confirmed by the
Bankruptcy  Court,  or that  any such  plan(s)  will be  consummated.  A plan of
reorganization  could result in holders of the Common  Stock  receiving no value
for their  interests.  Because  of such  possibilities,  the value of the Common
Stock is highly speculative.
                                      F-11
<PAGE>
Debtor-in Possession Financing

     On April 5, 2000, the Bankruptcy  Court entered an interim order permitting
the Company to enter into debtor-in  possession  financing with Foothill Capital
Corporation  (the "DIP  Facility").  The DIP Facility  remains  subject to final
Bankruptcy  Court  approval.  A hearing for this purpose has been set for May 3,
2000.  See Item 1 - "Business  - Chapter 11 Cases." If and when  approved by the
Bankruptcy  Court in a final order,  the DIP Facility will refinance all amounts
previously outstanding under the Foothill Credit Facility and provide additional
working capital.  As of April 5, 2000, the Company had borrowed a total of $15.4
million  (inclusive of the $12.5  million term loan portion)  under the Foothill
Credit Facility.

     Under the facility,  the Company may borrow up to $25 million (inclusive of
amounts  outstanding  under the Foothill  Credit  Facility),  subject to certain
limitations,  to  fund  ongoing  working  capital  needs  while  it  prepares  a
reorganization  plan.  The DIP Facility  includes a maximum of $12.5  million in
revolving  loans.  The DIP  Facility  also  contains a $12.5  million  term loan
bearing  interest at 15% per annum.  The DIP Facility  requires that the Company
have a rolling  twelve month EBITDA of no less than $15 million during its term,
which  expires on May 31,  2001.  Events  occuring in the Chapter 11 Cases could
result  in  earlier  termination.   The  DIP  Facility  includes  a  $4  million
sub-facility  for letters of credit.  Interest rates on the revolver  portion of
the DIP Facility are based on either the Wells Fargo Bank,  N.A.  Base Rate plus
2% or the Adjusted  Eurodollar  Rate plus 3.25%.  The DIP Facility is secured by
substantially  all of the assets of the  Company and its  subsidiaries,  subject
only to valid,  enforceable,  subsisting and non-voidable  liens of record as of
the date of commencement of the Chapter 11 Cases and other liens permitted under
the DIP Facility.

     The DIP Facility  contains  customary  covenants  including,  among others,
covenants restricting the incurrence of indebtedness,  the creation or existence
of liens,  the guarantee of other  indebtedness,  the  declaration or payment of
dividends,  the  repurchase or  redemption of debt and equity  securities of the
Company, change in business activities,  affiliate  transactions,  change in key
management and certain  corporate  transactions,  such as sales and purchases of
assets,  mergers,  or  consolidations.  The DIP  Facility  also  limits  capital
expenditures,  investments,  prepayments of other indebtedness, and requires the
delivery of financial and other  information to Foothill.  The DIP Facility also
contains  certain  customary  default  provisions  and  also  specifies  certain
possible  occurrences  in the Chapter 11 Cases  which could  result in events of
default.

     Availability  under the DIP Facility is limited to certain  percentages  of
accounts receivable and inventory, subject to other limitations based on rolling
twelve-month historical EBIDTA and rolling 60-day cash collections.

                                      F-12
<PAGE>
     The Company  believes the DIP Facility (if approved by the Bankruptcy Court
in a final  order)  should  provide it with  adequate  liquidity  to conduct its
operations  while it prepares a  reorganization  plan.  However,  the  Company's
liquidity, capital resources, results of operations and ability to continue as a
going concern are subject to known and unknown risks and uncertainties. See Item
7 -  "Management's  Discussion  and  Analysis  and Results of  Operations - Risk
Factors."

Going Concern Matters

     The accompanying  consolidated financial statements have been prepared on a
going concern basis of accounting and do not reflect any adjustments  that might
result if the Company is unable to continue as a going  concern.  The  Company's
recent losses and negative cash flows from operations, and the Chapter 11 Cases,
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.   As  discussed  above,   management  intends  to  submit  a  plan  for
reorganization  to the Bankruptcy  Court. The ability of the Company to continue
as a going  concern  and  appropriateness  of using the going  concern  basis is
dependent  upon,  among other things,  (i) the  Company's  ability to obtain and
comply with  debtor-in-possession  financing agreements,  (ii) confirmation of a
plan of reorganization under the Bankruptcy Code, (iii) the Company's ability to
achieve profitable  operations after such  confirmation,  and (iv) the Company's
ability to generate sufficient cash from operations to meet its obligations.

     Management  believes that, subject to the approval of the Bankruptcy Court,
the  DIP  Facility,  along  with  cash  provided  by  operations,  will  provide
sufficient  liquidity  to allow the  Company  to  continue  as a going  concern;
however,  there  can be no  assurance  that the  sources  of  liquidity  will be
available or sufficient to meet the Company's needs. The consolidated  financial
statements  do not  include  any  adjustments  relating  to  recoverability  and
classification  of recorded  asset amounts or the amount and  classification  of
liabilities  that might be necessary should the Company be unable to continue as
a going concern.

     A plan of  reorganization  could  materially  change the amounts  currently
recorded in the consolidated  financial statements.  The consolidated  financial
statements do not give effect to any  adjustment to the carrying value of assets
or amounts and  classifications  of  liabilities  that might be  necessary  as a
result of the Chapter 11 Cases.

4.   SIGNIFICANT PROVISIONS

     Provision for Managed Care Receivables
     --------------------------------------

     During  1999,  the  Company  continued  its  efforts  with its third  party
processor to timely  collect  managed care  receivable  accounts.  In the fourth
quarter,  management  concluded  these  efforts were not  achieving  anticipated
results and,  consequently,  determined  an  additional  provision  for doubtful
accounts was warranted.

                                     F-13
<PAGE>
     Impairment loss of long-lived assets
     ------------------------------------

     In accordance  with  Statement of Financial  Accounting  Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed  Of" ("SFAS  121"),  the Company  periodically  reviews the recorded
value of its  long-lived  assets to determine  if the future cash flows  derived
from these properties will be sufficient to recover the remaining recorded asset
values.  As a result of this review in the fourth  quarter of 1999,  the Company
recorded a noncash  pre-tax  charge of $1.9 million.  The  write-down  primarily
represents   leasehold   improvements   and   furniture   and  fixtures  for  36
under-performing   stores.  The  36  stores  are  concentrated  in  Florida  and
California.  Factors  leading  to the  impairment  of these  assets  included  a
combination of historical losses,  anticipated future losses and inadequate cash
flows.

     Extraordinary Item
     ------------------

     The  Company  recorded  an  extraordinary  loss of  $406,000 as a result of
refinancing  the  Company's  revolving  credit  facility.  (See  Note  8).  This
necessitated  the write-off of capitalized  costs  associated  with the previous
credit facility. Due to the Company's decision to fully reserve for the 1999 tax
benefit, the net tax effect on the extraordinary item is zero.

5.   WAL-MART MASTER LICENSE AGREEMENT AND OTHER AGREEMENTS

     Wal-Mart Agreement
     ------------------

     In 1994, the Company and Wal-Mart replaced their original  agreement with a
new master license agreement (the "Wal-Mart Agreement"), which increased minimum
and percentage  license fees payable by the Company and also granted the Company
the  opportunity  to  operate up to 400 vision  centers in  existing  and future
Wal-Mart  stores  (379  vision  centers  were in  operation  under the  Wal-Mart
Agreement at fiscal year end 1999). In January 1995, the Company made a lump sum
payment in exchange for such  opportunity.  The payment is being  amortized over
the initial term of the vision centers opened  subsequent to January 1, 1995. In
1997, the Wal-Mart Agreement was amended to provide that Wal-Mart must, by April
1, 2000,  grant the Company the  opportunity to operate 400 vision centers under
the Wal-Mart  Agreement,  and that,  with one exception,  all new vision centers
opened after 1997 will be located in California and North Carolina.  Each vision
center covered by the Wal-Mart Agreement has a separate license. Pursuant to the
Wal-Mart Agreement, the term of each such license is nine years with a renewable
option for one additional  three-year term.  Percentage  license fees remain the
same over the nine-year base term and three- year option term,  whereas  minimum
license fees increase during the three-year option term.

                                     F-14
<PAGE>
     Consulting and Management Agreement
     -----------------------------------

     Among  other  things,  the  Wal-Mart  Agreement  requires  an  independent,
licensed  optometrist  to  practice  adjacent  to or near each of the  Company's
vision centers for at least 48 hours per week. In 1990, the Company entered into
a long-term  consulting and management service agreement,  as amended,  with two
companies  (Eyecare Leasing,  Inc. ("ELI") and  Stewart-Phillips,  Inc. ("SPI"))
jointly owned by two  shareholders to recruit such  optometrists  for certain of
its vision centers.  Subject to applicable  state  regulations,  this agreement,
among other things,  required the Company to provide space and certain equipment
to the optometrists for which the optometrists pay the Company an occupancy fee.
In exchange  for their  services,  ELI and SPI  received  certain fees under the
agreement.  The net payments offset  occupancy  expense incurred by the Company.
Occupancy expense is a component of cost of goods sold.

     In January 1997, the Company completed various  transactions related to its
relationship with each of ELI and SPI. The transactions involved the termination
of such consulting agreement and transfer of the responsibilities of ELI and SPI
to a subsidiary of the Company. As a result of these  transactions,  the Company
acquired the right to the payments which  otherwise  would have been made to ELI
and SPI under the consulting  agreement.  The aggregate cost of the transactions
was $4.6 million,  which was  capitalized  as an  intangible  asset and is being
amortized  over the remaining life of the original term of vision center leases.
The Company  made a lump sum  payment of  $500,000  at closing and entered  into
promissory  obligations  for the balance,  payable over a 12-year period at 6.4%
interest.

     Mexico Agreement
     ----------------

     In 1994,  the Company  opened 8 vision centers in stores owned and operated
by Wal-Mart de Mexico, S.A. de C.V. ("Wal-Mart de Mexico"). In 1995, the Company
completed the negotiation of a master license  agreement  governing these vision
centers.  Pursuant to this agreement,  each vision center has an individual base
term of five years from the date of opening,  followed by two options  (each for
two years), and one option for one year. Each party has the right to terminate a
location which fails to meet specified sales levels.  The agreement provides for
annual fees based on a minimum and percentage of sales. The agreement also gives
the  Company a right of first  refusal to open  vision  centers in all stores in
Mexico owned by Wal-Mart de Mexico.  As of January 1, 2000, the Company operated
27 vision centers in Wal- Mart de Mexico stores.

     Sam's Club
     ----------

     The Company  also  operates  111 vision  centers in Sam's Club stores in 21
states.  Each such vision center is subject to a separate lease,  which provides
for  payment  of  percentage  and  minimum  rent and other  customary  terms and
conditions.  The leases for these vision  centers began expiring in 1998 and the
term for the remaining  leases will expire at various  times  through 2003.  The
Company has no option or right to extend the term of these leases.

                                      F-15
<PAGE>
     Fred Meyer
     ----------

     The Company operates 54 leased vision centers in stores owned by Fred Meyer
pursuant to a master license  agreement.  The agreement provides for minimum and
percentage  rent and  other  customary  terms  and  conditions.  The term of the
agreement  is for five years  (expiring  December  31,  2003),  with a five-year
option.

6.   ACQUISITIONS

     On July 28, 1998, the Company acquired all the outstanding capital stock of
Frame-n-Lens Optical, Inc.  ("Frame-n-Lens") in a transaction accounted for as a
purchase business combination.  Prior to the acquisition,  Frame-n-Lens operated
approximately  280 retail optical centers in 23 states.  The aggregate  purchase
price was $50  million  of which  $23  million  was paid in cash and  additional
borrowings from the Company's credit facilities, $24 million was assumed in debt
and  liabilities,  and  $3  million  was  established  as  a  deferred  purchase
obligation to be paid in quarterly installments over six years.

     The Company has  deposited  installment  payments of the deferred  purchase
obligation  into a separate  Company bank  account.  As of January 1, 2000,  the
Company had  deposited a total of  $833,000  which is included in the  Company's
cash  balance.  The Company has the right to  withhold  payment of the  deferred
purchase   obligation   based  upon  the   identification   of  any  undisclosed
liabilities. The Company is currently defending a class-action lawsuit which was
filed  against  Frame-n-Lens  and which was not  disclosed to the Company at the
time of  acquisition.  Although  management  cannot  predict the outcome of this
litigation,  we  believe  that the  amount  accrued  for the  deferred  purchase
obligation  will be  sufficient  to cover any  costs  incurred  related  to this
lawsuit.

     The excess of cost over fair value of assets acquired was $41 million,  and
is being amortized over 30 years using the straight-line  method. At the date of
acquisition  the assets of  Frame-n-Lens  included  approximately  $9 million of
goodwill.  Frame-n-Lens'  financial  position  and  results  of  operations  are
included with those of the Company for the periods subsequent to the date of the
acquisition.

     On October 23, 1998, the Company acquired all the outstanding capital stock
of New West  Eyeworks,  Inc.  ("New West") in a  transaction  accounted for as a
purchase  business  combination.  Prior to the  acquisition,  New West  operated
approximately  175 retail optical centers in 13 states.  The aggregate  purchase
price was $79 million,  including  the  assumption of certain  indebtedness  and
acquisition-related  expenses  which were paid with a portion of the proceeds of
the  Company's  12 3/4%  Senior  Notes  due 2005  (the  "Notes")  (See Note 8 to
consolidated  financial  statements).  In September  1999,  the Company sold the
Tempe  manufacturing  facility acquired from New West Eyeworks for approximately
$1 million.

                                      F-16
<PAGE>
     The excess of cost over fair value of the assets  acquired  was $64 million
and is being amortized over 30 years using the straight-line  method. New West's
financial  position and results of  operations  are  included  with those of the
Company in the period subsequent to the date of the acquisition.

     The following  summary  prepared on an unaudited basis presents the results
of operations of the Company  combined with  Frame-n-Lens and New West as if the
acquisitions had occurred at the beginning of the periods  presented,  after the
impact of certain  adjustments.  These  adjustments  include 1) the cost savings
related to the  consolidation of duplicative  manufacturing  and  administrative
support  facilities,  2) the  amortization  of goodwill,  3) increased  interest
expense on the acquisition  debt, 4) elimination of interest on debt repaid with
proceeds from the Notes and 5) the related  income tax effects for the following
year ended (amounts in thousands, except per share amounts):


                                       January 2,            January 3,
                                         1999                  1998
                                     (unaudited)            (unaudited)
                                    -------------          -----------
 Net sales                           $  325,670             $  313,937
 Operating income                    $   15,831             $   18,518
 Net (loss)                          $   (2,811)            $     (475)
 (Loss) per share                    $    (0.13)            $    (0.02)
-----------------------------------------------------------------------

     The pro forma results are not necessarily indicative of what actually would
have  occurred  if the  acquisitions  had  occurred as of the  beginning  of the
periods presented.

     In October 1997, the Company  acquired all the outstanding  common stock of
Midwest Vision,  Inc.  ("Midwest") in a transaction  accounted for as a purchase
business  combination.  Prior to the  acquisition,  Midwest  operated  51 retail
optical centers in Minnesota,  Wisconsin,  Iowa and North Dakota.  The aggregate
purchase price was approximately $5 million, including assumed long-term debt of
approximately  $1  million.  The  excess of cost over fair  value of the  assets
acquired was $2 million and is being amortized on a straight-line  basis over 15
years. The purchase price was paid in cash of $2 million, a note payable of $0.6
million and 110,975  shares of the  Company's  common  stock.  In addition,  the
Company  issued a put option to the seller,  entitling the seller to put 100,000
of such shares to the Company at $9.00 per share in January 2000.  Subsequent to
January 1, 2000, the seller  exercised the put option.  The Company has not paid
this obligation.  Any claims asserted by the seller will be addressed during the
Company's  Chapter  11  proceedings.  (See  Note  3  to  Consolidated  Financial
Statements.) The additional  obligation has been reflected as redeemable  common
stock.

                                      F-17
<PAGE>
7.   INVENTORY

     The Company  classifies  inventory as finished  goods if such  inventory is
readily  available  for  sale to  customers  without  assembly  or  value  added
processing.  Finished goods include contact lenses,  over the counter sunglasses
and  accessories.  The  Company  classifies  inventory  as raw  material if such
inventory  requires  assembly  or value  added  processing.  This would  include
grinding a lens blank, "cutting" the lens in accordance with a prescription from
an  optometrist,  and  fitting  the lens in a frame.  Frames  and uncut lens are
considered  raw material.  A majority of the Company's  sales  represent  custom
orders;  consequently,  the majority of the Company's inventory is classified as
raw material.

     Inventory  balances,  by  classification,  may  be  summarized  as  follows
(amounts in thousands):
                                               1999           1998
                                            ---------      ---------
 Raw material                               $  24,408      $  22,814
 Finished goods                                 8,804          7,634
 Supplies                                       1,161          1,222
                                            ---------      ---------
                                            $  34,373      $  31,670
                                            =========      =========
8.   LONG-TERM DEBT

     Senior Notes
     ------------

     On October 8, 1998,  the  Company  issued its $125  million 12 3/4%  Senior
Notes due 2005 (the "Notes")  pursuant to Rule 144A of the  Securities  Act. The
Notes,  which were sold at a discount for an aggregate  price of $123.6 million,
require  semiannual  interest  payments  commencing on April 15, 1999. The Notes
were issued pursuant to an indenture containing customary provisions  including:
limitations on incurrence of additional indebtedness;  limitations on restricted
payments;   limitations   on  asset  sales;   payment   restrictions   affecting
subsidiaries; limitations on liens; limitations on transactions with affiliates;
and other customary terms. In the event of a Change of Control (as defined), the
Company will be required to offer to  repurchase  the Notes at a purchase  price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest.
The Notes are  guaranteed  by a majority of the Company's  subsidiaries  and are
redeemable  at the option of the Company,  in whole or in part, at 105% of their
principal amount beginning  October 15, 2003 and at 100% on or after October 15,
2004.  In  addition,  the Company  may,  at its option,  redeem up to 35% of the
Notes, plus accrued  interest,  with the net cash proceeds of one or more equity
offerings at a redemption  price equal to 112.75% of the  principal  amount (see
Note 9 for financial information of guarantors).

     A  portion  of the  proceeds  from the  Notes was  utilized  to  extinguish
outstanding  indebtedness on the Company's existing credit facility (such credit
facility was terminated  simultaneously with the repayment),  with the remainder
to be utilized to complete the acquisition of New West and pay for miscellaneous
expenses related to the acquisitions of Frame-n-Lens and New West.

                                      F-18
<PAGE>
     In  anticipation  of the Notes  offering,  the Company  entered  into three
anticipatory  hedging  transactions with a notional amount of $100 million.  The
interest rates on these  instruments were tied to U.S.  Treasury  securities and
ranged  from  5.43%  to  5.62%.  The  Company  settled  these  transactions  for
approximately  $4.6 million.  The settlement costs are being treated as deferred
financing costs amortized over the life of the Notes.

     Foothill Credit Facility
     ------------------------

     On  November  12,  1999,  the Company  replaced  its prior  secured  credit
facility with a new $25.0 million secured credit facility with Foothill  Capital
Corporation  (the "Foothill  Credit  Facility").  The Foothill  Credit  Facility
consists of a $12.5 million term loan and a $12.5 million revolver. Availability
under the  revolver  portion  is  limited to  certain  percentages  of  accounts
receivable  and  inventory,  subject  to other  limitations  based on a  rolling
six-month  historical  EBITDA  covenant  and a rolling  60-day cash  collections
covenant. The Foothill Credit Facility expires on May 31, 2002.

     The proceeds of the Foothill  Credit Facility were available for making the
October 15, 1999 payment  under the Senior  Notes,  refinancing  existing  debt,
working capital, and general corporate purposes.  All obligations of the Company
under  the  Foothill  Credit  Facility  are   unconditionally   and  irrevocably
guaranteed jointly and severally by certain of the Company's subsidiaries.

     The revolver under the Foothill Credit Facility bears interest at rates per
annum equal to, at the option of the Company,  either (i)  Foothill's  Reference
Rate plus 2.00% or (ii) the LIBOR rate plus 3.25%.  The term loan portion  bears
interest  at the rate of 15% per annum and may be prepaid at any time,  but only
if at the time of the payment the Company  meets  certain  minimum  availability
requirements. Payment of the principal of the term loan is due on May 31, 2002.

     The Company  paid  origination  fees of 0.50% and 2.00% on the revolver and
the term loan  portions,  respectively.  The Company will pay a fee of 0.50% per
annum on the  unused  portion of the  revolver  and an annual fee of .25% on the
full amount of the revolver.  In December 2000,  the Company,  to the extent the
term loan has not been repaid,  must elect to pay a fee, or interest on the term
loan  increases  monthly.  (The  term loan is  divided  into Term Loan A (in the
amount of $2.5 million) and Term Loan B (in the amount of $10 million);  the fee
is 1% and 2%,  respectively  (payable on the outstanding  balance of Term Loan A
and Term  Loan B),  and the  monthly  interest  increase  is  .125%  and  .375%,
respectively.) In addition,  the Company will pay fees of 1.5% on any letters of
credit issued under the Foothill Credit Facility,  which are calculated based on
the amount of  outstanding  letters of credit.  There is a prepayment  fee of 1%
under the revolver portion of the Foothill Credit Facility.

     The Foothill Credit Facility contains customary covenants including,  among
others,  covenants  restricting the incurrence of indebtedness,  the creation or
existence of liens,  the guarantee of other  indebtedness,  the  declaration  or
payment of dividends, the repurchase or redemption of debt and equity securities
of the Company, change in business activities, affiliate transactions, change in

                                      F-19
<PAGE>
key management and certain corporate  transactions,  such as sales and purchases
of assets,  mergers,  or  consolidations.  The  Foothill  Credit  Facility  also
contains  certain  financial  covenants  relating to minimum  rolling  six-month
EBITDA and  rolling  three-month  net worth  requirements,  and  limitations  on
capital  expenditures,  investments,  prepayments  of  other  indebtedness,  and
delivery of financial and other information to Foothill and other matters.

     The Foothill Credit Facility contains certain customary default provisions,
including, among others, payment events of default, breach of representations or
warranties,  covenant defaults, an event of default based on a change in control
of the  Company,  a material  adverse  change  clause,  cross-defaults  to other
indebtedness of, and bankruptcy and judgment defaults against,  the Company, and
uninsured losses.

     As of January 1, 2000,  the Company is in  violation  of certain  financial
covenants under its Foothill Credit  Facility.  The Company filed for protection
under  Chapter  11 of the  Bankruptcy  Code on April  5,  2000.  (See  Note 3 to
Consolidated Financial Statements).

     Prior Credit Facility
     ---------------------

     On October 8, 1998,  the Company  entered  into a $25.0  million  revolving
credit  facility.  The  availability  under the credit  facility  was limited to
certain percentages of accounts receivable,  inventory and twelve-month trailing
EBITDA. All obligations of the Company under the credit facility were guaranteed
by a  majority  of the  Company's  subsidiaries.  Borrowings  under  the  credit
facility  were  secured  by  substantially  all  assets of the  Company  and its
subsidiaries.

     The credit  facility  charged  interest at rates per annum equal to, at the
option  of the  Company,  either  (i) the  applicable  Reference  Rate  plus the
applicable  margin  or (ii) the  LIBOR  rate  plus the  applicable  margin.  The
applicable  margin was a maximum of 2.00% for the  Reference  Rate and 3.25% for
the LIBOR rate.  The Company paid a fee of 0.50% per annum on the unused portion
of the credit facility.

     1997 Facility
     -------------

     In July 1997, the Company  entered into a syndicated  $45 million  two-year
unsecured  revolving  credit  facility.  Commitment  fees payable on the average
daily balance of the unused portion of the credit  facility were 0.25% per annum
in 1998 and 1997.

     The Company  paid  approximately  $710,110  and  $811,288  in various  fees
related to its various credit facilities in 1998 and 1999, respectively.

                                      F-20
<PAGE>
     Unsecured Notes
     ---------------

     The Company  entered into  unsecured  promissory  notes relative to various
transactions  completed with the Frame-n-Lens and New West  acquisitions in 1998
and the ELI and Midwest Vision  acquisitions in 1997 (See Note 6). The notes are
fixed rate  instruments,  with rates  ranging  from 6.4% to 8.5%.  At January 1,
2000, future minimum principal payments on total indebtedness, excluding capital
leases, were as follows (amounts in thousands):

 2000                                           $   20,154
 2001                                                  974
 2002                                                  545
 2003                                                  373
 2004                                                  373
 Thereafter                                        129,459
                                                -----------
                                                $  151,878
                                                ===========
Long-Term Debt Balances
-----------------------

     Long-term debt obligations at January 1, 2000 and January 2, 1999 consisted
of the following (amounts in thousands):
<TABLE>
<CAPTION>
                                                                1999               1998
                                                             ---------          ----------
        <S>                                                  <C>                <C>
        12 3/4% Senior Notes Due 2005                        $125,000           $ 125,000
        Discount on 12 3/4 % Senior Notes                      (1,253)             (1,391)
        Borrowings under New Credit Facility                   19,292                  --
        Borrowings under Prior Credit Facility                     --               6,000
        Other promissory notes                                  7,586               8,344
                                                             ---------          ---------
                                                             $150,625           $ 137,953
        Less current portion                                   20,154               1,518
                                                             ---------          ---------
                                                             $130,471           $ 136,435
                                                             =========          =========
</TABLE>

     As of January 1, 2000, the Company had borrowed $19.3 million under the New
Facility at a weighted average interest rate of 13%. The aggregate fair value of
the Company's  long-term debt  obligation  under the Foothill Credit Facility is
estimated to approximate its carrying value.

     This  note  contains   information   regarding  the  Company's   short-term
borrowings  and  long-term  debt as of January 1,  2000.  On April 5, 2000,  the
Company  filed  the  Chapter  11  Cases.  See Note 3 to  Consolidated  Financial
Statements.  As a result of the filing of the Chapter 11 Cases,  no principal or
interest  payments  will  be  made  on any  pre-petition  debt  until  a plan of
reorganization  defining the repayment terms has been approved by the Bankruptcy
Court.

9.   FINANCIAL INFORMATION OF GUARANTORS

     The Company's  wholly owned domestic  subsidiaries,  Midwest Vision,  Inc.;
NVAL  Healthcare  Systems,   Inc.;   International   Vision  Associates,   Ltd.;
Frame-n-Lens Optical, Inc.; Vision Administrators,  Inc.; Family Vision Centers,
Inc.; New West Eyeworks,  Inc.; Alexis Holdings Company, Inc.; and Vista Eyecare
Network,  LLC  (collectively,  the  "Guarantors"),  have  guaranteed on a senior
unsecured  basis,  jointly  and  severally,  the  payment of the  principal  of,
premium,  if any,  and  interest  on the Notes.  Combined  summarized  financial
information of the Guarantors is presented below (amounts in thousands):

                                      F-21
<PAGE>
<TABLE>
<CAPTION>
 For the years ending:               January 1, 2000         January 2, 1999        January 3, 1998
                                     ---------------         ---------------        ---------------
 <S>                                   <C>                     <C>                     <C>
 Net sales                           $    123,090              $   49,904              $    3,540
 Gross profit                        $     63,747              $   21,545              $    1,816
 Net  (loss)                         $    (10,151)             $   (2,861)             $      (39)

                                     January 1, 2000         January 2, 1999        January 3, 1998
                                     ----------------        ---------------        ---------------
 Current assets                      $     14,287              $   22,080              $   2,239
 Noncurrent assets                   $     16,574              $   15,832              $   3,970
 Current liabilities                 $     25,742              $   18,979              $     836
 Noncurrent liabilities              $      3,265              $    3,748              $    --
</TABLE>


10.   COMMITMENTS AND CONTINGENCIES

     Noncancelable Operating Lease and License Agreements
     ----------------------------------------------------

     As of  January  1,  2000,  the  Company  is a  lessee  under  noncancelable
operating lease  agreements for certain  equipment which expire at various dates
through  2003.  Additionally,  the  Company  is  required  to  pay  minimum  and
percentage  license fees pursuant to certain  commercial  leases and pursuant to
its agreements with its host store companies.


     Effective  December 20, 1991,  the Company  entered into a lease  agreement
with Wal-Mart for  approximately  66,000 square feet of corporate  office space.
The term of the lease is ten years  with a renewal  option of seven  years.  The
Company paid Wal-Mart  approximately  $215,000  annually in rental fees in 1999,
1998, and 1997.

     In connection with its  acquisition of Midwest  Vision,  Inc. (See Note 6),
the Company entered into a ten-year lease for administrative headquarters and an
optical laboratory located in St. Cloud, Minnesota.  The facility is leased from
the former  owner of Midwest  Vision.  Lease  expense  on the  headquarters  and
laboratory is approximately  $6,667 monthly which, in the opinion of management,
represents a fair market lease rate. Additionally, the Company assumed operating
lease agreements in connection with 51 freestanding  locations obtained from the
acquisition. Lease expense on these leases is approximately $64,000 monthly.

                                       F-22
<PAGE>
     In connection with its  acquisitions of Frame-n-Lens and New West (See Note
6),  the  Company  assumed   operating  lease   agreements  in  connection  with
approximately  280 and 175  vision  centers,  respectively,  obtained  from  the
acquisitions.  Through the Frame-n-Lens acquisition, the Company assumed a lease
for a manufacturing and distribution facility located in Fullerton,  California.
This  facility is subject to a lease with a term  expiring  on August 31,  2006.
Lease expense is $408,000 annually for this facility.

     Aggregate future minimum payments under the license and lease  arrangements
are as follows (amounts in thousands):
<TABLE>
<CAPTION>
                                            Capital           Operating
                  Fiscal Year                Leases             Leases
                  -----------                ------             ------
 <S>                                        <C>              <C>
 2000                                       $   259          $  33,102
 2001                                           136             30,251
 2002                                            13             24,965
 2003                                           ---             18,102
 2004                                           ---             11,166
 Thereafter                                     ---             17,185
                                            -------          ---------
 Total minimum lease payments               $   408          $ 134,771
 Less amounts representing interest              31          =========
                                            -------
 Present value of minimum capital lease
    payments                                    377

 Less current installments of obligations       236
    under capital leases                    -------

 Obligations under capital leases
    excluding current installments          $   141
                                            =======
</TABLE>
     Total rental expenses  related to cancelable and  non-cancelable  operating
leases were approximately,  $43.1 million, $30.1 million, and $22.8 million, for
the years  ended  January  1,  2000,  January  2,  1999,  and  January  3, 1998,
respectively.

     Guy Laroche and Gitano Trademark Licenses
     -----------------------------------------

     The Company  has a license  agreement  with Guy  Laroche of North  America,
Inc.,  giving the Company the right to use the  trademark  "Guy  Laroche" in its
vision  centers in North  America.  The  agreement  requires  the Company to pay
minimum and percentage  royalties on retail and wholesale sales. The Guy Laroche
agreement,  as amended,  expires on  December  31,  2001.  Under the Guy Laroche
agreement,  the Company paid $310,000,  $389,000,  and $397,000,  in fees during
1999, 1998, and 1997, respectively.

                                     F-23
<PAGE>
     In 1999,  1998, and 1997, the Company paid $53,000,  $96,000,  and $121,000
respectively,  in fees to Gitano,  Inc. and its successors in connection  with a
license  agreement  (which  expired in 1998) which gave the Company the right to
use the "Gitano" trademark in its vision centers.

       Change in Control and Other Arrangements
       ----------------------------------------

     There are  agreements  between  the  Company  and  twelve of its  executive
officers  which  provide  severance  benefits  in the  event of  termination  of
employment  under  certain  circumstances  following  a change in control of the
Company (as defined).  The  circumstances  are  termination by the Company other
than because of death or disability  commencing prior to a threatened  change in
control (as defined), or for cause (as defined), or by the officer as the result
of a voluntary  termination  (as defined).  Following any such  termination,  in
addition to  compensation  and  benefits  already  earned,  the officer  will be
entitled to receive a lump sum severance  payment equal to up to three times the
officer's  annual  rate of base  salary.  The  term of each  agreement  is for a
rolling  three-years  unless the Company  gives  notice that it does not wish to
extend such term,  in which case the term of the  agreement  would  expire three
years from the date of the notice.


11.  INCOME TAXES

     The  Company  accounts  for  income  taxes  under  Statement  of  Financial
Accounting  Standards  (SFAS No.  109)  "Accounting  for  Income  Taxes,"  which
requires the use of the  liability  method of  accounting  for  deferred  income
taxes.  The  components  of the net  deferred  tax  assets/(liabilities)  are as
follows (amounts in thousands):

                                           As of January 1,   As of January 2,
                                                 2000               1999
                                           ----------------   ----------------

 Total deferred tax liabilities                $ (8,980)           $ (9,001)
 Total deferred tax assets                       17,918              12,757
 Valuation allowance                             (8,553)             (3,371)
                                               --------           ---------
 Net deferred tax asset                        $    385            $    385
                                               ========           =========

     The sources of the  difference  between the  financial  accounting  and tax
basis of the  Company's  liabilities  and assets which give rise to the deferred
tax  liabilities  and  deferred  tax assets  and the tax  effects of each are as
follows (amounts in thousands):

                                     F-24
<PAGE>
<TABLE>
<CAPTION>
                                           As of January 1,   As of January 2,
                                                 2000               1999
                                           ----------------   ----------------
 <S>                                           <C>                <C>
 Deferred tax liabilities:
   Depreciation                                $  4,935            $  4,691
   Reserve for foreign losses                     2.218               2,218
   Other                                          1,827               2,092
                                               --------           ---------
                                               $  8,980            $  9,001
                                               ========           =========
 Deferred tax assets:
   Accrued expenses and reserves               $  3,206            $  3,292
   Inventory basis differences                      171                 456
   Net operating loss carryforwards              10,698               5,507
   Alternative minimum tax                        2,062               2,483
   Other                                          1,781               1,019
                                               --------           ---------

                                               $ 17,918           $  12,757
                                               ========           =========
</TABLE>

     The  consolidated  provision  for income  taxes  consists of the  following
(amounts in thousands):

                                                 Year Ended
                                    ------------------------------------
                                     January 1,  January 2,  January 3,
                                        2000        1999        1998
                                        ----        ----        ----
 Current:
    Federal                         $     0      $  1,426    $  1,937
    State                                 0           191         330
                                    --------    ---------    --------
                                          0         1,617       2,267
                                    --------    ---------    --------
 Deferred:
    Federal                               0           338       1,296
    State                                 0            82         145
                                    --------    ---------    --------
                                          0           420       1,441
                                    --------    ---------    --------
 Total Provision for Income         $     0      $  2,037    $  3,708
   Taxes                            ========    =========    ========


                                      F-25
<PAGE>
     The tax expense differs from the amounts resulting from multiplying  income
before income taxes by the statutory  federal  income tax rate for the following
reasons (amounts in thousands):
<TABLE>
<CAPTION>

                                                                                  Year Ended
                                                               -------------------------------------------------
                                                               January 1,         January 2,         January 3,
                                                                  2000               1999               1998
                                                               ----------         ----------         ----------
 <S>                                                         <C>                <C>                      <C>
 Federal income tax(benefit) provision at statutory rate        $(5,971)           $1,853             $3,156
 State income taxes, net of federal income tax benefit             (439)              180                314
 Foreign losses not deductible for U.S. federal tax purposes          3                37                 65
 Change in valuation allowance for U.S. federal and state taxes   5,182              (548)
 Nondeductible goodwill                                           1,425               292
 Other, net                                                        (200)              223                173
                                                                --------           -------            -------
                                                                $    0             $2,037             $3,708
                                                                ========           =======            =======
</TABLE>
     At January 1, 2000,  the Company had U.S.  regular tax net  operating  loss
carryforwards  of $28.5 million that can reduce future federal income taxes.  If
not utilized,  these  carryforwards  will expire  beginning in 2007. The Company
also has  non-expiring  alternative  minimum  tax credit  carryforwards  of $2.1
million available to offset future regular taxes.

     On July 28, 1998, the Company acquired all of the outstanding capital stock
of Frame-n-Lens.  The Company accounted for the acquisition as a purchase,  with
the excess of the purchase price over the fair value of the net assets  acquired
to be allocated to goodwill.  Frame-n-Lens had net operating loss  carryforwards
of $1.4 million.

     On October 25, 1998,  the Company  acquired all of the  outstanding  common
stock and common stock  equivalents of New West.  The Company  accounted for the
acquisition  as a purchase,  with the excess of the purchase price over the fair
value of the net assets  acquired to be allocated to goodwill.  New West had net
operating  loss  carryforwards  of $5.5 million and $4.9 million for regular tax
and  alternative  minimum tax purposes,  respectively,  which begin to expire in
2006.  These net  operating  losses  are  subject  to  limitations  from a prior
ownership change.

     At January 3, 1998,  the  Company  recorded a valuation  allowance  of $2.4
million due to the uncertainty  regarding the realizability of its net operating
loss   carryforwards.   A  portion  of  the  net  operating  loss   carryforward
(approximately  $3.3 million) related to tax benefits (subject to the outcome of
the audit  discussed  below) from the exercise of stock  options  granted by the
former  Chairman  of the Company to two  shareholders  who own  companies  which
recruited optometrists for the Company.

     As a result of an examination by the Internal  Revenue  Service  ("IRS") of
the  Company's  1992  tax  return,   the  Company  adjusted  its  net  operating
carryforward loss by $314,000. the agreement between the Company and the IRS was
reached  in  February  1998 for which no income tax was due or  receivable.  The
Company  reduced its  valuation  allowance  by  approximately  $3.3  million and
increased additional paid-in-capital for this benefit.


                                      F-26
<PAGE>
     At January 1, 2000, the Company recorded an additional  valuation allowance
of $5.2 due to the  uncertainty  of the  realizability  of the current  year net
operating losses.

     The Company's net operating loss  carryforward  of $28.5 million at January
1, 2000  could be  limited  in the event of a greater  than 50%  change in stock
ownership of the Company.  The limitation  would be based on the stock value and
the Federal Exempt Tax Rate on the date of ownership  change.  These limitations
could create a cap on the amount of the NOLs that would be deductible  each year
going  forward  until the amount is depleted or the time  limitation on the NOLs
expires.

     In Mexico,  the location of the Company's foreign  operations,  the Company
pays the  greater of its income tax or an asset tax.  Because  the  Company  has
operating losses in Mexico, the Company pays no income tax, but it is subject to
the asset tax.  Therefore,  no  provision  for income taxes has been made on the
Company's books for its operations in Mexico.

12.  EARNINGS PER COMMON SHARE

     In 1997,  the Company  adopted SFAS No. 128,  "Earnings  per Share".  Basic
earnings  per common  share are  computed by dividing net income by the weighted
average number of common shares  outstanding  during the year.  Diluted earnings
per common share are computed as basic  earnings per common share,  adjusted for
outstanding  stock  options that are  dilutive.  The  computation  for basic and
diluted  earnings per share may be summarized  as follows  (amounts in thousands
except per share information):

<TABLE>
<CAPTION>                                                         1999              1998              1997
                                                                  ----              ----              ----
 <S>                                                           <C>               <C>               <C>
 Income/(loss) before extraordinary item                       $(17,156)         $  3,414          $  5,573
 Extraordinary loss, net of tax                                    (406)               --                --
                                                               --------          --------          --------
 Net Income/(loss)                                             $(17,562)         $  3,414          $  5,573
                                                               ========          ========          ========

 Weighted shares outstanding                                     21,068            20,949            20,676

 Basic earnings/(loss) per share:
  Earnings before Extraordinary item                           $  (0.81)         $   0.16          $   0.27
  Extraordinary loss, net of tax                                  (0.02)               --                --
                                                               --------          --------          --------
 Net Income/(loss)                                             $  (0.83)         $   0.16          $   0.27
                                                               ========          ========          ========

 Weighted shares outstanding                                     21,068            20,949            20,676
 Net options issued to employees                                    110               285               163
                                                               --------          --------          --------
 Aggregate shares outstanding                                    21,178            21,234            20,839

 Diluted earnings/(loss) per share:
  Earnings before Extraordinary item                           $  (0.81)         $   0.16          $   0.27
  Extraordinary loss, net of tax                                  (0.02)               --                --
                                                               --------          --------          --------
  Net Income/(loss)                                            $  (0.83)         $   0.16          $   0.27
                                                               =========          ========         ========
</TABLE>

                                      F-27
<PAGE>
     Outstanding  options with an exercise  price below the average price of the
Company's common stock have been included in the computation of diluted earnings
per common share,  using the treasury stock method, as of the date of the grant.
In 1999,  these  options have been excluded  from the  calculation  due to their
anti-dilutive effect.

13.  SUPPLEMENTAL DISCLOSURE INFORMATION

     Supplemental disclosure information is as follows (amounts in thousands):

     (i) Supplemental Cash Flow Information
<TABLE>
<CAPTION>
                                                                 1999              1998              1997
                                                                 ----              ----              ----
            <S>                                                <C>               <C>               <C>
            Cash paid for
              Interest                                        $17,826             $2,257            $1,582
              Income taxes                                        495              1,918             2,383
</TABLE>
     (ii) Supplemental Noncash Investing and Financial Activities

     The  acquisition  information  relates  to the  Frame-n-Lens  and New  West
     acquisitions in 1998 (See Note 6 to Consolidated Financial Statements).
<TABLE>
<CAPTION>                                                                       1998                 1997
                                                                             --------             --------
           <S>                                                                   <C>                   <C>
           Business acquisitions, net of cash acquired
              Fair value of assets acquired                                $   30,240             $  4,459
              Purchase price in excess of net assets acquired                 104,813                6,671
              Liabilities assumed                                             (37,696)              (8,022)
              Stock issued                                                         --                 (836)
                                                                           -----------            --------
           Net cash paid for acquisitions                                  $   97,357             $  2,272
                                                                           ==========             ========
</TABLE>

    (iii) Supplemental Balance Sheet Information

     Significant  components of accrued  expenses and other current  liabilities
     may be summarized as follows:
<TABLE>
<CAPTION>
                                                                  1999              1998
                                                               ---------          --------
           <S>                                                  <C>                <C>
           Accrued employee compensation and benefits         $  6,343          $   6,966
           Accrued rent expense                                  4,047              3,677
           Accrued license fees                                  1,996              2,184
           Accrued acquisition expenses                          1,678              5,215
           Accrued capital expenditures                          1,345                498



                                      F-28
<PAGE>
     (iv) Supplemental Income Statement Information

     The components of interest expense, net, may be summarized as follows:

                                                                  1999           1998              1997
                                                              ---------        --------          --------

           Interest expense on debt and capital leases        $  18,306       $   5,721          $  1,853
           Purchase discounts on invoice payments                   (37)           (509)             (483)
           Finance fees and amortization of hedge and swap
              agreements                                          1,158             407               236
           Interest income                                          (73)            (86)              (38)
           Other                                                    (25)              5               (14)
                                                              ---------        --------          --------
                                                              $  19,329       $   5,538          $  1,554
                                                              =========       =========          ========
</TABLE>


14.  EQUITY TRANSACTIONS

     Employee Stock Option and Incentive Award Plan
     ----------------------------------------------

     In 1996, the Company  adopted the Restated Stock Option and Incentive Award
Plan (the "Plan")  pursuant to which  incentive stock options  qualifying  under
Section 422A of the Internal Revenue Code and nonqualified  stock options may be
granted to key  employees.  The Plan also  provides  for the  issuance  of other
equity  awards,  such as awards  of  restricted  stock.  The Plan  replaced  and
restated all the  Company's  prior  employee  stock option  plans.  The Plan was
amended in 1999 to increase the number of shares  under the Plan from  3,350,000
to 4,350,000.  The Plan is  administered  by the  Compensation  Committee of the
Company's Board of Directors.  The  Compensation  Committee has the authority to
determine the persons receiving  options,  option prices,  dates of grants,  and
vesting periods, although no option may have a term exceeding ten years. Options
granted prior to 1996 have a term of five years.

     Directors' Stock Option Plan
     ----------------------------

     In April 1997, the Company adopted the Restated Non-Employee Director Stock
Option Plan (the "Directors'  Plan"),  pursuant to which stock options for up to
500,000  shares of Common Stock may be granted to  non-employee  directors.  The
Directors' Plan replaced and restated the Company's prior non-employee  director
stock option plan. The Directors' Plan provides for automatic  grants of options
to purchase  7,500 shares of the  Company's  common  stock to each  non-employee
director serving on the date of each annual meeting of  shareholders,  beginning
with the 1997 annual meeting.  Of the options  granted,  50% of the shares under
each option are exercisable on the second  anniversary of the grant date, 75% in
three years, and 100% in four years. All option grants are at exercise prices no
less than the market  value of a share of Common  Stock on the date of grant and
are  exercisable  for a ten-year  period.  Options granted under the predecessor
stock  option plan are  exercisable  for a five-year  period.  Options  covering
90,000 shares under the Directors' Plan were exercisable at January 1, 2000.

                                      F-29
<PAGE>
     All Stock Option Plans
     ----------------------

     All exercise prices  represent the estimated fair value of the Common Stock
on the date of grant as  determined  by the Board of  Directors.  Of the options
granted,  50% of the shares  under each option are  exercisable  after two years
from the grant date, 75% in three years, and 100% in four years.

     The  Committee  granted a stock option for 100,000  shares of the Company's
common stock to one  executive  officer  which vests at the rate of one-sixth of
the  number of shares  covered  by the  option  for each  month of  service  the
executive renders to the Company.

     Stock option transactions during the three years ended January 1, 2000 were
as follows:
<TABLE>
<CAPTION>
                                                             1999               1998                1997
                                                          ---------           ---------           ---------
 <S>                                                      <C>                 <C>                 <C>
 Options outstanding beginning of year                    2,582,380           2,294,203           1,950,166
 Options granted                                            928,060           1,171,750             631,864
 Options exercised                                          (12,491)           (294,657)             (7,840)
 Options cancelled                                         (882,528)           (588,916)           (279,987)
                                                          ---------            ---------           ---------
 Options outstanding end of year                          2,615,421           2,582,380           2,294,203
                                                          =========           =========           =========
 Options exercisable end of year                            760,162             748,803           1,020,674
                                                          =========           =========           =========
 Weighted average option prices per share:
    Granted                                                $  4.893            $  5.030            $  4.878
    Exercised                                              $  4.500            $  4.989            $  2.168
    Cancelled                                              $  5.044            $  9.461            $  9.640
 Outstanding at year end                                   $  4.832            $  4.881            $  6.028

 Options exercisable end of year                           $  4.369            $  4.973            $  7.891
</TABLE>


     The Company has adopted the disclosure provisions of Statement of Financial
Accounting  Standards No. 123,  "Accounting for Stock-Based  Compensation."  The
Company will continue to account for stock option awards in accordance  with APB
Opinion No. 25. Had compensation  cost for the Plan been determined based on the
fair value at the grant date for awards in 1999,  1998, and 1997 consistent with
the  provisions  of SFAS No. 123,  the  Company's  net earnings and earnings per
share would have been reduced to the pro forma amounts  indicated below (amounts
in thousands except per share information):
<TABLE>
<CAPTION>

                                      F-30
<PAGE>
                                         1999              1998              1997
                                       --------          --------          --------
 <S>                                   <C>               <C>               <C>
 As reported:

   Net earnings (loss)                 $(17,562)         $  3,414          $  5,573
                                       ========          ========          ========

   Earnings (loss) per share           $  (0.83)         $  0.16           $  0.27
                                       ========          ========          ========
 Pro forma:

   Net earnings (loss)                 $(19,266)         $  2,655          $  5,142
                                       ========          ========          ========

   Earnings (loss) per share           $  (0.91)         $  0.13           $  0.25
                                       ========          ========          ========
</TABLE>
     Basic and diluted earnings per share are the same for each year.

     The fair value of each option grant is estimated on the date of grant using
the  Black-Scholes   option-pricing   model.  The  following   weighted  average
assumptions were used in the model:

<TABLE>
<CAPTION>
                                         1999              1998              1997
                                       -------           -------           -------
 <S>                                     <C>               <C>               <C>
 Dividend yield                          0.00%             0.00%             0.00%

 Expected volatility                       88%               76%               74%

 Risk free interest rates                 5.1%              4.9%              6.1%

 Expected lives (years)                   4.68             4.91              4.51
</TABLE>

     The  following  table  shows  the  options   outstanding  and  the  options
exercisable with pertinent data related to each:
<TABLE>
<CAPTION>

                                                 Options Outstanding                    Options Exercisable
-------------------------------------------------------------------------------------------------------------
                                                      Weighted
                                                       Average        Weighted        Number        Weighted
                                       Number         Remaining        Average      Exercisable      Average
    Range of                        Outstanding      Contractual      Exercise         As of        Exercise
    Exercise Prices                 as of 1/1/00        Life            Price         1/1/00          Price
--------------------------------------------------------------------------------------------------------------
    <S>                                <C>              <C>            <C>            <C>           <C>

$1.62 - $4.82                          937,510         6.72            $3.765        483,562          $3.896
$4.83 - $5.32                        1,111,550         7.38            $5.260        256,100          $5.181
$5.33 - $7.88                          566,361         5.97            $5.758         20,500          $5.375
------------------------------------------------------------------------------------------------------------
$1.62 - $7.88                        2,615,421         6.84            $4.832        760,162          $4.369

</TABLE>



                                      F-31
<PAGE>
     Restricted Stock Awards
     -----------------------

     Restricted stock grants,  with an outstanding  balance of 106,000 shares at
January  1, 2000,  were  awarded to certain  officers  and key  employees  which
require  five  years of  continuous  employment  from  the date of grant  before
vesting and receiving the shares without restriction. The number of shares to be
received without restriction is based on the Company's performance relative to a
peer group of  companies.  For awards made in 1998,  restricted  shares,  to the
extent  not  awarded  after  five  years,  vest  after ten years of  employment.
Unamortized  deferred  compensation expense with respect to the restricted stock
was $302,000, and $430,000 at January 1, 2000 and January 2, 1999, respectively,
and is being amortized over the five-year vesting period.  Deferred compensation
expense aggregated $131,000 and $120,000 in 1999 and 1998,  respectively.  There
were no new grants or  forfeitures  of  restricted  stock in 1999.  A summary of
restricted stock granted during 1998 is as follows:

                                                             1998
                                                           -------
 Shares granted                                             67,000
 Shares forfeited                                           15,000
 Weighted-average fair value of
    stock granted during year                              $  5.34

      Preferred Stock
     ---------------

     The Company is  authorized  to issue up to  5,000,000  shares of  preferred
stock, par value $1 per share, with such terms, characteristics and designations
as may be determined  by the Board of  Directors.  No such shares are issued and
outstanding.


     Shareholder Rights Plan
     -----------------------

     In  January  of  1997,  the  Company's   Board  of  Directors   approved  a
Shareholders  Rights Plan (the "Rights Plan").  The Rights Plan provides for the
distribution  of one Right for each  outstanding  share of the Company's  Common
Stock held of record as of the close of  business  on January  27,  1997 or that
thereafter becomes outstanding prior to the earlier of the final expiration date
of the Rights or the first date upon which the Rights become  exercisable.  Each
Right  entitles  the  registered  holder to  purchase  from the Company one one-
hundredth of a share of Series A Participating  Cumulative  Preferred Stock, par
value $0.01 per share, at a price of $40.00 (the "Purchase  Price"),  subject to
adjustment.  The  Rights are not  exercisable  until ten  calendar  days after a
person or group (an "Acquiring Person") buys or announces a tender offer for 15%
or more of the Company's  Common  Stock,  or if any person or group has acquired
such an interest, the acquisition by that person or group of an additional 2% of
the Company's  Common Stock.  In the event the Rights become  exercisable,  then
each Right will entitle the holder to receive that number of shares of Common

                                      F-32
<PAGE>
Stock (or, under certain circumstances,  an economically  equivalent security or
securities  of the Company)  having a market value equal to the Purchase  Price.
If, after any person has become an Acquiring Person (other than through a tender
offer approved by qualifying members of the Board of Directors),  the Company is
involved in a merger or other business  combination where the Company is not the
surviving corporation, or the Company sells 50% or more of its assets, operating
income,  or cash flow, then each Right will entitle the holder to purchase,  for
the Purchase  Price,  that number of shares of common or other  capital stock of
the acquiring  entity which at the time of such  transaction have a market value
of twice the Purchase Price. The Rights will expire on January 26, 2007,  unless
extended,  unless  the Rights are  earlier  exchanged,  or unless the Rights are
earlier  redeemed by the Company in whole, but not in part, at a price of $0.001
per Right. In February 1998, the Company's Board of Directors amended the Rights
Plan  effective  March 1, 1998 to  provide  that  Rights  under this plan can be
redeemed  and  certain  amendments  to this plan can be  effected  only with the
approval of the  Continuing  Directors,  which are defined in the Rights Plan as
the current  directors and any future directors that are approved or recommended
by Continuing Directors.

     On April 22,  1999,  the Company  permitted  a group,  of which a director,
Campbell B.Lanier,  III, is a member, to acquire  beneficial  ownership of up to
25% of the  Company's  common stock  without  triggering  the  provisions of the
Rights Plan. By an agreement  dated as of September 9, 1999, the Company further
permitted  the same  group to acquire up to 28% of the  Company's  common  stock
(inclusive of amounts previously  purchased by the group) without triggering the
provisions  of the Rights Plan.  The group agreed that, if it acquired more than
25% of the  outstanding  common stock of the Company,  the group would vote such
additional  shares in the same ratio as all other shares  voted by  shareholders
other than the members of the group and their affiliates.

15.  SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

     Selected  quarterly data for the Company for the fiscal years ended January
1, 2000 and January 2, 1999 is as follows (amounts in thousands except per share
information).


                                      F-33
<PAGE><TABLE>
<CAPTION>
FISCAL 1999                                                           Quarter Ended
--------------------------------------------------------------------------------------------------------------
                                              April 3             July 3          October 2        January 1
                                            -----------         ----------      -------------    -------------
Net sales                                   $ 86,634          $   82,531        $  83,262          $  76,628
Cost of goods sold                            37,088              36,745           37,474             36,461
                                            --------            --------          --------          --------
Gross profit                                  49,546              45,786           45,788             40,167
Selling, general, and administrative expense  42,446              42,937           45,355             46,424
Impairment loss on long-lived assets              --                  --               --              1,952
                                            --------            --------          --------          --------
Operating income (loss)                        7,100               2,849              433             (8,209)
Interest expense, net                          4,665               4,743            4,809              5,112
                                            --------            --------          --------          --------
Income (loss) before income taxes              2,435              (1,894)          (4,376)           (13,321)
Provision (benefit) for income taxes             970                (584)          (1,396)             1,010
                                            --------            --------          --------          --------
Income/(loss) before extraordinary item        1,465              (1,310)          (2,980)           (14,331)
Extraordinary item, net of tax                    --                  --               --               (406)
                                             -------            --------          --------          --------
Net income/(loss)                           $  1,465            $ (1,310)         $(2,980)          $(14,737)
                                            ========            ========          ========          ========
Basic earnings (loss) per common share:
 Earnings/(loss) before extraordinary item  $   0.07            $  (0.06)         $ (0.14)          $  (0.68)
 Extraordinary loss                               --                  --               --              (0.02)
                                            --------            --------          --------          --------
Net income/(loss)                               0.07               (0.06)           (0.14)             (0.70)
                                            ========            ========          ========          ========
Diluted earnings (loss) per common share
Earnings/(loss) before extraordinary item  $    0.07            $  (0.06)         $ (0.14)          $  (0.68)
 Extraordinary loss                               --                  --               --              (0.02)
                                            --------            --------          --------          --------
Net income/(loss)                               0.07               (0.06)           (0.14)             (0.70)
                                            ========            ========          ========          ========

<CAPTION>
 FISCAL 1998                                                          Quarter Ended
--------------------------------------------------------------------------------------------------------------
                                              April 4             July 4          October 3        January 2
                                            -----------         ----------      -------------    -------------
<S>                                         <C>                 <C>               <C>               <C>
Net sales                                   $ 54,408            $ 51,037          $ 67,654          $ 72,232
Cost of goods sold                            24,465              23,890            30,757            33,817
                                            --------            --------          --------          --------
Gross profit                                  29,943              27,147            36,897            38,415
Selling, general, and administrative expense  25,557              23,286            32,995            39,575
                                            --------            --------          --------          --------
Operating income (loss)                        4,386               3,861             3,902            (1,160)
Interest expense, net                            277                 235               736             4,290
                                            --------            --------          --------          --------
Income (loss) before income taxes              4,109               3,626             3,166            (5,450)
Provision (benefit) for income taxes           1,657               1,483             1,314            (2,417)
                                            --------            --------          --------          --------
Net income (loss)                              2,452               2,143             1,852            (3,033)
                                            ========            ========          ========          ========
Basic earnings (loss) per common share      $   0.12            $   0.10          $   0.09          ($  0.14)
                                            ========            ========          ========          ========
Diluted earnings (loss) per common share    $   0.12            $   0.10          $   0.09          ($  0.14)
                                            ========            ========          ========          =========

</TABLE>


                                      F-34
<PAGE>
16.  REPORTABLE BUSINESS SEGMENTS

     The Company's  operating  business  segments provide quality retail optical
services  and  products  that  represent  high  value  and  satisfaction  to the
customer.  The separate  businesses  within the Company use the same  production
processes  for eyeglass  lens  manufacturing,  offer  products and services to a
broad  range of  customers  and  utilize the  Company's  central  administrative
offices to coordinate product purchases and distribution to retail locations.  A
field  organization  provides  management support to individual store locations.
The Mexico operation has a separate laboratory and distribution center in Mexico
and buys a majority of its products from local vendors. However, market demands,
customer requirements,  laboratory  manufacturing and distribution processes, as
well as product  offerings,  are  substantially  the same for the  domestic  and
Mexico  business.  Consequently,  the Company  considers its domestic and Mexico
businesses as one reportable segment under the definitions  required by SFAS No.
131 - "Disclosures about Segments of an Enterprise and Related Information."

     Information relative to sales and identifiable assets for the United States
and Mexico for the fiscal  years  ended  January 1, 2000,  January 2, 1999,  and
January 3, 1998 are summarized in the following  tables  (amounts in thousands).
Identifiable  assets  include  all  assets  associated  with  operations  in the
indicated   reportable   segment   excluding   inter-company   receivables   and
investments.
<TABLE>
<CAPTION>

                                          United States         Mexico           Other        Consolidated
                                          -------------         ------           -----        ------------
 <S>                                        <C>                <C>               <C>           <C>
  1999

     Sales                                  $  325,101         $  3,954         $    --        $  329,055
                                            ==========         ========          ======        ==========
     Identifiable Assets                    $  217,690         $  2,328         $   201        $  220,219
                                            ==========         ========          ======        ==========

  1998

     Sales                                  $  241,705         $  3,429          $  197        $  245,331
                                            ==========         ========          ======        ==========
     Identifiable Assets                    $  226,323         $  2,147          $  627        $  229,097
                                            ==========         ========          ======        ==========

 1997

     Sales                                  $  182,333         $  2,988         $ 1,033        $  186,354
                                            ==========         ========          ======        ==========
     Identifiable Assets                    $   80,284         $  2,279         $   687        $   83,250
                                            ==========         ========          ======        ==========

</TABLE>
                                      F-35
<PAGE>


<TABLE>
<CAPTION>
                                                     SCHEDULE II


                                        VISTA EYECARE, INC. AND SUBSIDIARIES
                                          VALUATION AND QUALIFYING ACCOUNTS
                               January 1, 2000, January 2, 1999, and January 3, 1998
                                                   (In thousands)

                                                          Additions
                                             ------------------------------------
  Description               Balance at          Charged to         Charged to                          Balance at
                        Beginning of Period  Cash and Expenses    Other Accounts      Deductions      End of Period
--------------         -------------------   -----------------    ---------------     ----------      -------------
  <S>                       <C>                  <C>                   <C>               <C>            <C>
  Year ended
  January 3, 1998
     Allowance for
     Uncollectible
     Accounts Receivable     $  353                $  928                 --              $  519          $    762


  Year ended
  January 2, 1999
     Allowance for
     Uncollectible
     Accounts Receivable     $  762                $  900               $  726            $  872          $  1,516

  Year ended
  January 1, 2000
     Allowance for
     Uncollectible
     Accounts Receivable     $1,516                $3,384               $  885            $1,382          $  4,403

</TABLE>


                                      F-36
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                         VISTA EYECARE, INC.


                                         By:  /s/James W. Krause
                                         ------------------
                                         James W. Krause
                                         Chairman of the Board & Chief Executive
                                         Officer and Director
Date: April ____, 2000

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant on March __, 2000, in the capacities indicated.

  Signature                             Title

  /s/James W. Krause
-----------------------------
  James W. Krause                       Chairman of the Board and
                                        Chief Executive Officer and Director

  /s/Angus C. Morrison
-----------------------------
  Angus C. Morrison                     Senior Vice President, Chief Financial
                                        Officer
                                        (Principal Financial Officer)
  /s/Timothy W. Ranney
-----------------------------
  Timothy W. Ranney                     Vice President, Corporate Controller
                                        (Principal Accounting Officer)

  /s/Peter T. Socha
-----------------------------
  Peter T. Socha                        Senior Vice President,
                                        Strategic Planning and Managed Care,
                                        Director
  /s/David I. Fuente
-----------------------------
  David I. Fuente                       Director


  /s/Ronald J. Green
-----------------------------
  Ronald J. Green                       Director


   /s/James E. Kanaley
-----------------------------
  James E. Kanaley                      Director


  /s/Campbell B. Lanier, III
-----------------------------
  Campbell B. Lanier, III               Director


   /s/J. Smith Lanier, II
-----------------------------
  J. Smith Lanier, II                   Director



<PAGE>
                                  EXHIBIT INDEX


10.15     Amended and Restated Credit Agreement dated as of November 12, 1999 by
          and between the Company and Foothill Capital Corporation.

10.16     Agreement  dated as of  September  9,  1999,  by and  among  the
          Company, ITC Service Company, and Campbell B. Lanier, III.

21        Subsidiaries of the Registrant.

23        Arthur Andersen LLP Consent.

27        Financial Data Schedule.